UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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the Securities Exchange Act of 1934
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Summit Hotel Properties, Inc.
(Name of Registrant as Specified In Its Charter)
Summit Hotel Properties, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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, 2017
Dear Fellow Stockholder:
You are cordially invited to attend the 2017 annual meeting of stockholders of Summit Hotel Properties, Inc., a Maryland corporation, to be held on Thursday, May 18, 2017, at 8:00 a.m. central time, at the Hampton Inn & Suites, 200 San Jacinto Boulevard, Austin, Texas 78701.
The attached proxy statement, accompanied by the notice of annual meeting, describes the matters expected to be acted upon at the meeting. We urge you to review these materials carefully and to use this opportunity to take part in the affairs of Summit Hotel Properties by voting on the matters described in this proxy statement. We hope that you will be able to attend the meeting.
Your vote is important. Whether or not you plan to attend the meeting, please complete the enclosed proxy card and return it as promptly as possible, or authorize a proxy to vote your shares by calling the toll-free telephone number, or via the Internet. The enclosed proxy card contains instructions regarding all three methods of voting. If you attend the meeting, you may continue to have your shares voted as you have previously instructed or you may withdraw your proxy at the meeting and vote your shares in person. We look forward to seeing you at the meeting.
Sincerely, | |
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Daniel P. Hansen | |
Chief Executive Officer |
SUMMIT HOTEL PROPERTIES, INC.
12600 Hill Country Boulevard, SuiteHILL COUNTRY BLVD, SUITE R-100Austin, Texas
AUSTIN, TEXAS 78738
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 201618, 2017
NOTICE IS HEREBY GIVEN that the 2016 Annual Meeting
The 2017 annual meeting of Stockholders (the “Annual Meeting”)stockholders of Summit Hotel Properties, Inc., a Maryland corporation, (the “Company”) will be held on Thursday, May 19, 201618, 2017, at 8:00 a.m., Central Time,central time, at the Hampton Inn & Suites, 200 San Jacinto Boulevard, Austin, Texas 78701, for the following purposes:
1. To elect five directors nominated by our Board of Directors, each to serve until the next annual meeting of our stockholders and until their successors are duly elected and duly qualified; 2. To consider and vote upon the ratification of the appointment of Ernst & Young, LLP, as the Company’s independent registered public accounting firm for 2017; 3. To consider and vote upon an advisory (non-binding) resolution on executive compensation; 4. To consider and vote upon a proposed charter amendment to repeal the Company’s election to be subject to Section 3-804(c) of the Maryland General Corporation Law (the “MGCL”); and 5.To transact such other business as may be properly brought |
The Company knows of no other matters to come before the Annual Meeting. Only stockholdersannual meeting and at any adjournments or postponements thereof.
You may vote if you were a holder of record as of our common stock at the close of business on March 21, 2016 are entitled to notice of, and to vote at,20, 2017, the Annual Meeting and any adjournment or postponement of the meeting.record date.
Whether or not you plan to attend the Annual Meeting,annual meeting your vote is very important, and the Company encourages you to promptly authorize a proxy to vote your shares.
BY ORDER OF THE BOARD OF DIRECTORS
BY ORDER OF THE BOARD OF DIRECTORS | |
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Christopher Eng | |
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Austin, Texas
, 2017
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Stockholder Proposals and Director Nominations for the 2018 Annual Meeting of Stockholders | 42 | |
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PROXY STATEMENT20162017 ANNUAL MEETING OF STOCKHOLDERS
Proxy Solicitation
The Board of Directors (the “Board”) of Summit Hotel Properties, Inc., a Maryland corporation, has made these materials available to you on the Internet or, upon your request, has delivered printed versions of these materials to you by mail, in connection with its solicitation of proxies for its Annual Meeting2017 annual meeting of Stockholders (“Annual Meeting”)stockholders to be held on May 19, 2016,18, 2017, at 8:00 a.m., Central Time,central time, at the Hampton Inn & Suites, 200 San Jacinto Boulevard, Austin, Texas 78701, and at any adjournments or postponements thereof. These materials were first made available to stockholders on April 5, 2016., 2017. Unless the context requires otherwise, references in this proxy statement to “Summit,” “we,” “our,” “us” and the “Company” refer to Summit Hotel Properties, Inc., and its consolidated subsidiaries.
Pursuant to rules adopted by the SEC,Securities and Exchange Commission (the “SEC”), we have elected to provide access to our proxy materials on the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) to our stockholders. All stockholders will have the ability to access the proxy materials atwww.proxyvote.com or request to receive a printed set of the proxy materials by mail or an electronic set of materials by email. Instructions on how to access the proxy materials on the Internet or to request a printed copy may be found in the Notice of Internet Availability. Stockholders also may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.
In addition to solicitation by mail, certain of our directors, officers and employees may solicit proxies by telephone, personal contact or other means of communication. They will not receive any additional compensation for these activities. Also, brokers, banks and other persons holding common stock on behalf of beneficial owners will be requested to solicit proxies or authorizations from beneficial owners. We will bear all costs incurred in connection with the preparation, assembly and mailing of the proxy materials and the solicitation of proxies and will reimburse brokers, banks and other nominees, fiduciaries and custodians for reasonable expenses incurred by them in forwarding proxy materials to beneficial owners of our common stock. Although no proxy solicitor has been engaged at this time, we may determine it is necessary to employ an outside firm to assist in the solicitation process. If so, we will pay the proxy solicitor reasonable and customary fees.
No person is authorized to give any information or to make any representation not contained in this proxy statement and, if given or made, you should not rely on that information or representation as having been authorized by us. The delivery of this proxy statement does not imply that the information herein has remained unchanged since the date of this proxy statement.
Summit Contact Information
The mailing address of our principal executive office is 12600 Hill Country Boulevard, Suite R-100, Austin, Texas 78738, and our main telephone number is (512) 538-2300. We maintain an Internet website atwww.shpreit.com. www.shpreit.com. Information at or connected to our website is not and should not be considered part of this proxy statement.
FREQUENTLY ASKED QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
On what am I voting? You are being asked to consider and vote on |
· Election of the five director nominees named in this proxy statement (Proposal 1);
· Ratification of Ernst & Young, LLP (“EY”), as our independent registered public accounting firm for the fiscal year ending December 31, 20162017 (Proposal 2);
· An advisory (non-binding) basis of our namedresolution to approve executive officers’ compensation (Proposal 3); and
· Approval of a charter amendment to repeal the Company’s election to be subject to Section 3-804(c) of the MGCL (Proposal 4).
Who can vote?
Holders of our common stock as of the close of business on the record date, March 20, 2017, are entitled to vote, either in person or by the Teamster Affiliates Pension Plan (“Teamsters”), if properly presentedproxy, at the Annual Meeting (Proposal 4).
| annual meeting. Each share of our common stock is entitled to one vote. Cumulative voting is not permitted in the election of directors. How do I vote or authorize a proxy to vote my shares? By Proxy. Before the annual meeting, you may authorize a proxy to vote your shares in one of the following ways: · By telephone; ·By |
· By completing and signing your proxy card and mailing it in time to be received prior to the Annual Meeting.
The telephone and Internet voting procedures are designed to confirm your identity, to allow you to give your voting instructions and to verify that your instructions have been properly recorded. If you wish to vote by telephone or Internet, please follow the instructions that are included in the Notice of Internet Availability and the proxy card. If you mail us your properly completed and signed proxy card, or vote by telephone or Internet, your shares will be voted according to the choices that you specify.
If you sign and mail your proxy card without marking any choices, your proxy will be voted:
FORthe election of all director nominees named in this proxy statement (Proposal 1);
FORthe ratification of EY as our independent registered independent public accounting firm for the fiscal year ending December 31, 20162017 (Proposal 2);
FORthe approval onof an advisory (non-binding) basis of our namedresolution on executive officers’ compensation (Proposal 3); and
AGAINSTFOR the approval on an advisory (non-binding) basisof a charter amendment to repeal the Company’s election to be subject to Section 3-804(c) of the stockholder proposal submitted by the Teamsters, if properly presented at the Annual MeetingMGCL (Proposal 4).
We do not expect that any other matters will be brought before the Annual Meeting.annual meeting. If an issue should arise for vote at the Annual Meetingannual meeting that is not included in the proxy material, the proxy holders will vote your shares in accordance with their discretion.
In PersonPerson. — If your shares are registered directly in your name with our transfer agent, you are considered the stockholder of record with respect to those shares and you may attend the Annual Meetingannual meeting and vote in person. If your shares are held in the name of your broker, bank or other nominee and you wish to attend the Annual Meeting,annual meeting, you must bring an account statement or letter from the nominee indicating that you were the owner of the shares on March 21, 2016.20, 2017. If your shares are held in the name
of your broker, bank or other nominee and you wish to vote at the Annual Meeting,annual meeting, you must obtain a legal proxy from your broker, bank or other nominee that holds your shares giving you the right to those shares.
May I change or revoke my vote?
Yes. You may change your vote or revoke your proxy at any time prior to the annual meeting by:
· Notifying our Secretary in writing that you are revoking your proxy;
· Providing another signed proxy that is dated after the proxy you wish to revoke;
· Using the telephone or Internet voting procedures; or
· Attending the Annual Meetingannual meeting and voting in person. Attendance at the Annual Meetingannual meeting will not, by itself, revoke a duly executed proxy.
Will my shares be voted if I do not provide my proxy?
It depends on whether you hold your shares in your own name or in the name of a bank or brokerage firm. If you hold your shares directly in your own name, they will not be voted unless you provide a proxy or vote in person at the annual meeting.
Brokerage firms generally have the authority to vote customers’ un-voted shares on certain “routine” matters. If your shares are held in the name of a brokerage firm, the brokerage firm can vote your shares for the ratification of EY as our independent registered independent public accounting firm for the fiscal year ending December 31, 20162017 (Proposal 2) if you do not timely provide your voting instructions timely, because this matter is considered “routine” under the applicable rules. The other items (Proposals Nos. 1, 3 and 4) are not considered “routine” and therefore may not be voted by your broker without instruction.
What constitutes a quorum?
As of the record date, a total of 93,811,172 shares of our common stock were issued and outstanding and entitled to vote at the annual meeting. To conduct the annual meeting, a majority of the shares entitled to vote must be present in person or by proxy. This is referred to as a “quorum.” If you submit a properly executed proxy card or authorize a proxy to vote by telephone or on the Internet, your shares will be counted for purposes of determining the presence of a quorum. Abstentions and broker “non-votes” will be counted as present and entitled to vote for purposes of determining a quorum. A broker “non-vote” occurs when a bank, broker or other nominee who holds shares for another person has not received voting instructions from the owner of the shares and, under the applicable rules, does not have discretionary authority to vote on a matter.
What vote is needed to approve the matters submitted?
Election of Directors (Proposal 1). Directors are elected by a plurality of the votes cast at the annual meeting. “Plurality” means that the nominees receiving the largest number of votes cast are elected as directors up to the maximum number of directors to be chosen at the meeting. For purposes of this vote, abstentions and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote for this proposal. The Board has adopted a policy on voting regarding directors. Under the policy, at any meeting of stockholders at which members of the Board are to be elected by the stockholders in an uncontested election, any nominee for director who receives a greater number of votes “withheld” from his or her election than votes “for” his or her election will submit to the Board a written offer to resign from the Board no later than two weeks after the certification of the voting results.
For additional information regarding this policy, please see “The Board of Directors and Its Committees — Policy on Voting Regarding Directors.”
Ratification of Appointment of EY (Proposal 2). The affirmative vote of a majority of the votes cast at the Annual Meetingannual meeting is required to approve this proposal. For purposes of this vote, abstentions will not be counted as votes cast and will have no effect on the result of the vote for this proposal.
Approval on an Advisory (Non-Binding) Basis of Our NamedResolution on Executive Officers’ Compensation (Proposal 3). The affirmative vote of a majority of the votes cast at the Annual Meetingannual meeting is required to approve this proposal. For purposes of this advisory vote, abstentions and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote for this proposal.
Approval on an Advisory (Non-Binding) Basis of a Charter Amendment to Repeal the Company’s Election to be Subject to Section 3-804(c) of the Stockholder Proposal Submitted by the TeamstersMGCL (Proposal 4). The affirmative vote of a majority of the votes entitled to be cast at the Annual Meeting is required to approve this proposal. For purposes of this advisory vote, abstentions and broker non-votes will not be counted as votes cast and will have nothe effect on the result of thea vote foragainst this proposal.
We are sending only a single Notice of Internet Availability of Proxy Materials to any household at which two or more stockholders reside if they share the same last name or we reasonably believe they are members of the same family, unless we have received instructions to the contrary from any stockholder at that address. This practice is known as “householding” and is permitted by rules adopted by the SEC. This practice reduces the volume of duplicate information received at your household and helps us to reduce costs. We will deliver promptly, upon written request or oral request, a separate copy of the Notice of Internet Availability of Proxy Materials to a stockholder at a shared address to which a single copy of the document was previously delivered. If you received a single copy of this document for your household for this year, but you would prefer to receive your own copy, you may direct requests for separate copies in the future to the following address: Summit Hotel Properties, Inc., Attention: Secretary, 12600 Hill Country Boulevard, Suite R-100, Austin, Texas 78738; (512) 538-2300.78738. If you are a stockholder who receives multiple copies of our proxy materials, you may request householding by contacting us in the same manner and requesting a householding consent form.
PROPOSAL 1.
1:
ELECTION OF DIRECTORS
Introduction
As of the date of this proxy statement,April , 2017, the Board has five members. The five persons named below, each of whom currently serves on the Board, have been recommended by the Nominating and Corporate Governance Committee and nominated by our Board to serve on the Board until our 2017 Annual Meeting2018 annual meeting of Stockholdersstockholders and until their respective successors are duly elected and qualify.duly qualified. The Board has no reason to believe that any of the persons named below as a nominee for election to the Board will be unable, or will decline, to serve if elected. The Board has determined that all of theeach director nomineesnominee named below, other thanexcept Mr. Hansen, areis independent under applicable SEC and NYSENew York Stock Exchange (the “NYSE”) rules.
Recommendation:
Recommendation
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEFOR EACH OF THE NOMINEES.
Information Regarding the Nominees and Executive Officers
The following table sets forth the name, position with the Company and age (as of the Annual Meeting)annual meeting) of each nominee for election to the Board at the Annual Meeting:annual meeting:
 Name | Position | Age | ||
Daniel P. Hansen | Chairman, President and Chief Executive Officer | 48 | ||
Bjorn | Independent | 65 | ||
Jeffrey W. Jones | Lead Independent Director and Chair of Audit Committee | 55 | ||
Kenneth J. Kay | Independent Director and Chair of Compensation Committee | 62 | ||
Thomas W. Storey | Independent Director | 60 |
We believe that all of the nominees are intelligent, experienced, collegial, insightful and proactive with respect to management and risk oversight and that they exercise good judgment. The biographical descriptions below set forth certain information with respect to each nominee, for election to the Board, including the experience, qualifications, attributes or skills of each nominee that led us to conclude that such personhe should serve as a director, if elected.
Nominees
Daniel P. Hansen. Mr. Hansen has served as our President and Chief Executive Officer and been a member of the Board since our formation in June 2010. Mr. Hansen was appointed Chairman of the Board in January 2017. Prior to joining our company, Mr. Hansen served in various capacities at The Summit Group. Mr. Hansen joined The Summit Group in October 2003 as Vice President of Investor Relations. His responsibilities included leading the capital raising efforts for Summit Hotel Properties, LLC’s (“SHP LLC”) private placements of its equity securities and assisting in acquisition due diligence. In 2005, he was appointed to SHP LLC’s Board of Managers and was promoted to Executive Vice President, in which capacity he was part of the team that acquired over $140 million of hotel properties and led the development of over $240 million of hotel assets.President. He was appointed President of The Summit Group and Chief Financial Officer of SHP LLC in 2008. His primary responsibilities included the development and execution of growth strategies for SHP LLC, raising equity capital and hotel development and acquisition. Prior to joining The Summit Group, Mr. Hansen spent 11 years with Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) in various leadership positions, culminating as a Vice President and Regional Sales Manager for Merrill Lynch in the Texas Mid-South Region, which included Texas, Louisiana, Arkansas and Oklahoma.Region. Mr. Hansen received a B.A. in economics from South Dakota State University.
The Board, upon the recommendation of the Nominating and Corporate Governance Committee, has determined that Mr. Hansen should serve as a director, if elected, because he currently serves as our Chairman, President and Chief Executive Officer and provides a critical link between the executive management team, which is responsible for the day-to-day management of the Company, and the Board. We believe his service as a director enables the Board to perform its oversight function with the benefits of management’s perspectives on our business. Mr. Hansen also provides us with extensive experience in the hospitality industry as well as a capital markets background that assists the Board in analyzing capital raising opportunities and issues.
Bjorn R. L. Hanson. Dr. Hanson has been a member of the Board since the completion of our initial public offering, or IPO, in February 2011. Dr. Hanson served as our Lead Independent Director from June 2015 to January 2017. Dr. Hanson has worked in the hospitality industry for more than 3540 years and has been involved in consulting research and investment banking in the lodging sector. He joined the New York University School of Continuing Professional Studies in June 2008 as a clinical professor teaching in the school’s graduate and undergraduate hospitality and tourism programs and directing applied research projects. In 2010, he was appointed as the divisional dean of that school’s Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management, which he served as until returning to his full time faculty role in 2014. Before joining the Tisch Center, Dr. Hanson was a partner with PricewaterhouseCoopers LLP and its predecessor, Coopers & Lybrand LLP, which he joined in 1989. Dr. Hanson founded the hospitality, sports, convention and leisure practice and held various positions at PricewaterhouseCoopers and Coopers & Lybrand, including National Industry Chairman for the Hospitality Industries, National Service Line Director for Hospitality Consulting, National Industry Chairman for Real Estate, Real Estate Service Line Director and National Director of Appraisal Services. Additionally, he served on the U.S. leadership committee and global financial advisory services management committee of PricewaterhouseCoopers. Dr. Hanson was also managing director with two Wall Street firms, Kidder, Peabody & Co. and PaineWebber Inc., for which he led banking and research departments for lodging and gaming. Dr. Hanson received a B.S. from Cornell University School of Hotel Administration, an M.B.A. from Fordham University and a Ph.D. from New York University.
The Board, upon the recommendation of the Nominating and Corporate Governance Committee, has determined that Dr. Hanson should serve as a director, if elected, because he brings a wide range of experience in consulting research and investment banking in the hospitality industry to the Board. He also brings an academic perspective on the hospitality and tourism industries, which enhances the ability of the Board to analyze macroeconomic issues and trends relevant to our business. Finally, Dr. Hanson’s leadership roles in market trend analysis, economic analysis and financial analysis specific to our industry provide the Board with additional depth in analyzing financial reporting issues faced by companies similar to ours.
Jeffrey W. Jones. Mr. Jones has been a member of the Board since July 2014.2014 and was appointed Lead Independent Director in January 2017. From September 2003 to December 2012, Mr. Jones served as the Chief Financial Officer for Vail Resorts, Inc. (NYSE: MTN), a publicly held resort management company, and also served as a member of the board of directors of Vail Resorts, Inc. from June 2008 through December 2012. In addition, later in his tenure at Vail Resorts, Inc., Mr. Jones served as President —- Lodging, Retail and Real Estate. Mr. Jones currently serves on the board of directors of Diamond Resorts International, Inc. (NYSE: DRII), a publicly held vacation ownership, hospitality and management services company, where he is a member of the audit and compensation committees. Mr. Jones is also currently a member of the board of directors, chairs the audit committee and is a member of the compensation committee for Noodles & Company (NASDAQ: NDLS), a publicly held fast-casual restaurant chain. Mr. Jones also serves on the board of directors, chairs the audit and finance committee and is a member of the compensation committee of Hershey Entertainment and Resorts, a privately held entertainment and hospitality company. He is also a member of the US Bank Advisory Board and is a member of the board of the Leeds School of Business, University of Colorado Boulder. Prior to joining Vail Resorts, Inc., Mr. Jones held chief financial officer positions with Clark Retail Enterprises and Lids Corporation. Mr. Jones received a BAB.A. in Accounting and American Studies from Mercyhurst College and is a member of the American Institute of Certified Public Accountants (AICPA).
The Board, upon the recommendation of the Nominating and Corporate Governance Committee, has determined that Mr. Jones should serve as a director, if elected, because of his significant management, financial, and hospitality industry and mergers and acquisition experience and expertise, which he has acquired through his fifteen years as a chief financial officer, including ten years as chief financial officer and four years as a director, as well as
president of lodging, retail and real estate, of a publicly held resort management company. In addition, Mr. Jones’s other experience as a public company director and audit committee member and chair provides the Board with perspective into corporate governance best practices.
Kenneth J. Kay. Mr. Kay has been a member of the Board since July 2014. Mr. Kay is currently the Chief Financial Officer of MGM Holdings, Inc. (the parent company of Metro-Goldwyn-Mayer, Inc.), a leading entertainment company focused on the production and global distribution of film and television content. Mr. Kay is also a Managing Director of Raven LLC, an investment and advisory services firm located in Las Vegas, Nevada, a position he has held since co-founding the firm in 2012. Raven LLC provides debt and equity capital and management consulting and advisory services to small and medium sized businesses. Previously, Mr. Kay held the position of Chief Financial Officer of Las Vegas Sands Corp. (“Las Vegas Sands”) (NYSE: LVS) from December 2008 to July 2013, where he was responsible for all worldwide financial, planning, procurement, technology and risk aspects of the company. Prior to working for Las Vegas Sands, Mr. Kay was Senior Executive Vice President and Chief Financial Officer of CB Richard Ellis Group, Inc. (“CBRE”) (NYSE: CBG), a global commercial real estate services firm, from June 2002 to December 2008. Mr. Kay began his career with PricewaterhouseCoopers, primarily focusing his efforts on large, publicly owned multinational companies. After leaving public accounting, his career included senior financial and operational roles at Ameron International, Systemed Inc., Universal Studios and, just prior to CBRE, as Chief Financial Officer of Dole Food Company, Inc. (formerly NYSE: DOLE). Mr. Kay is a member of the Board of Governors of Cedars Sinai Medical Center and The Board of Advisors of the USC Leventhal School of Accounting. Mr. Kay received a B.S. degree in accounting and an MBAM.B.A. degree from the University of Southern California. Mr. Kay is a Chartered Global Management Accountant, a Certified Public Accountant and a member of the American Institute of Certified Public Accountants.
The Board, upon the recommendation of the Nominating and Corporate Governance Committee, has determined that Mr. Kay should serve as a director, if elected, because of his professional background and experience, education, Fortune 500 senior-executive level positions in real estate and hospitality and his extensive finance, accounting, operational and operational experience.mergers and acquisitions experience and expertise.
Thomas W. Storey. Mr. Storey has been a member of the Board since the completion of our IPO in February 2011 and was appointed2011. Mr. Storey served as our Non-Executive Chairman of the Board infrom July 2015.2015 until January 2017. Mr. Storey has worked in the hospitality industry for more than 25 years. He was the President of Fairmont Hotels and Resorts and the Executive Vice President, Business Strategy for Fairmont Raffles Hotels International (“FRHI”), a leading global hotel company with over 125 hotels worldwide under the Fairmont, Raffles and Swissôtel brands, which Mr. Storey joined in 1999. Mr. Storey has worked for multiple hospitality companies in an executive capacity including Marriott Hotels and Resorts, Doubletree Hotels, Promus Hotels and Radisson Hotels, International. Mr. Storey has been a member of various hospitality industry organizations, including the American Hotel & Lodging Association, the Travel Industry Association of America, and Professional Conference and Meeting Planners. He has also served on multiple public and private boards including Candlewood Hotels, Legacy Hotels Real Estate Investment Trust, Travelclick, LLC and the Wall Street Institute. Mr. Storey received a B.A. in economics from Bates College and an M.B.A. from the Johnson School at Cornell University.
The Board, upon the recommendation of the Nominating and Corporate Governance Committee, has determined that Mr. Storey should serve as a director, if elected, because he provides the Board with strategic vision specific to the hospitality industry. In addition, Mr. Storey has substantial leadership experience in the hospitality industry, including as Executive Vice President, Business Strategy of FRHI, where Mr. Storey was instrumental in helping lead that company through various lodging cycles. The Board expects Mr. Storey’s experience in analyzing and reacting to changing conditions in the hospitality industry will serve the Board. The Board also expects Mr. Storey’s operations experience with FRHI will help him provide valuable insights to the Board. Mr. Storey also possesses particular expertise in business travel, an important aspect of our business.
Senior Executive Officers
Daniel P. Hansen. Information regarding Daniel P. Hansen is described above under “Information Regarding the Nominees and Executive Officers — Nominees.“Nominees.”
Craig J. Aniszewski. Mr. Aniszewski has served as our Executive Vice President and Chief Operating Officer since our formation in June 2010. Mr. Aniszewski joined The Summit Group in January 1997 as Vice President of Operations and Development. He became the Executive Vice President and Chief Operating Officer of The Summit Group in 2007 and was a member of the Board of Managers of SHP LLC from January 2004 until February 2011. Mr. Aniszewski joined The Summit Group following 13 years with Marriott International, Inc., where he held sales and operations positions in full-service convention and resort hotels. During his career with Marriott, he also worked in the select-service sector, holding positions including the Director of Sales and General Manager for Residence Inn by Marriott and Courtyard by Marriott-branded hotels located in Florida, New York, Connecticut, Pennsylvania, Maryland and North Carolina. Mr. Aniszewski received a B.S. degree in criminal justice with minors in business and psychology from the University of Dayton.
Greg A. Dowell. Mr. Dowell has served as our Executive Vice President, Chief Financial Officer and Treasurer since October 2014. Prior to joining Summit, Mr. Dowell held the position of Senior Executive Vice President and Chief Operating Officer at American Campus Communities (“ACC”) (NYSE: ACC). During his thirteen-year tenure, Mr. Dowell managed all aspects of operations, facilities management, human resources, information technology and various aspects of accounting and systems development. He played a key role in the development of ACC’s specialized operating platform which facilitated American Campus Communities becoming the first student housing REIT to be publicly traded in 2004. SinceFollowing ACC’s initial public offering, Mr. Dowell orchestrated the successful integration of more than $2.8 billion in asset growth and oversaw the management of over 44 million square feet of residential and mixed-use real estate comprised of over 300 communities. Prior to joining ACC, Mr. Dowell spent ten years in progressive capacities with Century Development where he began as an accountant and ultimately served as Senior Vice President of Management Services over the student housing portfolio.Services. Mr. Dowell received his B.S. in Accounting from the University of Louisiana at Lafayette and is a certified public accountant.
Christopher R. Eng. Mr. Eng has served as our Vice President, General Counsel and Secretary since our formation in June 2010. He was appointed Senior Vice President and Chief Risk Officer in May 2014, in addition to his roles as General Counsel and Secretary. In March 2016, he was appointed Executive Vice President in addition to his roles as General Counsel, Chief Risk Officer and Secretary. Mr. Eng was appointed Vice President, General Counsel and Secretary of The Summit Group and SHP LLC in 2004. Mr. Eng was responsible for The Summit Group’s legal affairs and for guiding its corporate compliance, focusing on real estate acquisitions and dispositions, franchise licensing, corporate insurance coverage, corporate governance and securities industry regulatory compliance. Prior to joining The Summit Group, Mr. Eng was an Assistant Vice President and Trust Officer for The First National Bank in Sioux Falls. Mr. Eng received B.A. degrees in history and English from Augustana College (S.D.) and a J.D. degree from the University of Denver College of Law.
Paul Ruiz. Mr. Ruiz has served as Summit’s Vice President and Chief Accounting Officer since April 29, 2014. Prior to joining the Company, Mr. Ruiz served in senior executive roles for companies in a variety of industries, including real estate and technology. From April 2013 to April 2014, he served as a consulting chief financial officer for Bridgepoint Consulting, a financial consulting firm in Austin, Texas. From February 2011 to April 2013, Mr. Ruiz was the Senior Director of Global Corporate Accounting for Freescale Semiconductor, Inc. n/k/a NXP Semiconductors N.V (NASDAQ: NXPI), a global semiconductor manufacturer. From April 2008 to January 2011, Mr. Ruiz was the Chief Financial Officer at Sensortran, Inc. (now part of Halliburton, Inc. — NYSE: HAL), a fiber-optics based technology company in Austin, Texas. He began his career with Pricewaterhouse Coopers where he was an audit manager, providing audit and business advisory services to entrepreneurial, rapidly growing and Fortune 500 companies. Mr. Ruiz graduated with highest honors from the University of Texas at Austin with a Bachelor of Business Administration in Accounting and earned his MBA from Baylor University. He is a Certified Public Accountant.
PROPOSAL 2.2:
RATIFICATION OF APPOINTMENT OF ERNST & YOUNG, LLP (“EY”), AS INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
OF THE COMPANY FOR 2017The
Our Audit Committee of the Board selected the accounting firm of EY to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2016.2017. Although current laws, rules and regulations, as well as the Audit Committee charter, require the Company’s independent registered public accounting firm to be engaged, retained and supervised by the Audit Committee, the Board considers the appointment of the independent registered public accounting firm to be an important matter of stockholder concern and is submitting the appointment of EY for ratification by stockholders as a matter of good corporate practice. EY has served as the Company’s independent registered public accounting firm since March 25, 2013.
A An EY representative of EY is expected towill be present at the Annual Meetingannual meeting and will be given the opportunity to make a statement if he or she so desires and will be available to respond to appropriate questions.
Recommendation:
Recommendation:
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEFOR RATIFICATION OF THE APPOINTMENT OF EY AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF THE COMPANY FOR 2016.2017.
PROPOSAL 3.3:
ADVISORY NON-BINDING(NON-BINDING) VOTE ON EXECUTIVE COMPENSATION
In accordance with the requirements of Section 14A of the Securities Exchange Act (which was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the related rules of the SEC)1934, as amended (the “Exchange Act”), we are including in this proxy statement a separateproviding stockholders with the opportunity to vote on an advisory (non-binding) resolution subject to stockholder vote, to approve in a non-binding vote, the compensation of our named executive officers as disclosed in “Compensation Discussionthis proxy statement in accordance with the SEC’s rules. This is commonly known as, and Analysis,” the accompanying compensation tables, and the related narrative disclosureis referred to in this proxy statement.statement as, a “say-on-pay” proposal or resolution. The Board intends to hold a non-binding,an advisory (non-binding) vote on the compensation of our named executive officers each year.
This say-on-pay proposal gives our stockholders the opportunity to express their views on our named executive officers’ compensation. We are asking our stockholders to indicate their support for our named executive officers’ compensation as described in this proxy statement. This vote is not limited to any specific item of compensation, but rather addresses the overall compensation of our named executive officers and our philosophy, policies and practices relating to their compensation as described in this proxy statement in accordance with SEC rules.
As described in detail under the heading “Compensation Discussion and Analysis,” our executive compensation programs are designed to attract, retain and motivate our named executive officers, who are critical to our success. Our compensation program is designed to create incentives for our named executive officers to maximize long-term stockholder value. Under these programs, our named executive officers are rewarded for the achievement of our annual objectives, long-term and strategic objectives and the realization of increased stockholder value. Please refer to the “Compensation Discussion and Analysis” in this proxy statement for additional details about our executive compensation programs.
Accordingly, we are asking our stockholders to approve, in a non-bindingan advisory (non-binding) vote, the following resolution in respect of this Proposal 3:
“NOW, THEREFORE, BE IT RESOLVED, that the stockholders of the Company approve, on an advisory (non-binding) basis, the compensation of the Company’s named executive officers as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the accompanying compensation tables and the related narrative disclosure in this proxy statement.disclosure.”
This vote is advisory and therefore not binding on the Company, the Board or the Compensation Committee. The Board and the Compensation Committee value the opinions of the Company’s stockholders and expect to take into account the outcome of the vote when considering future executive compensation decisions.
The Company’s primary objective is to enhance stockholder value over time by generating strong risk-adjusted returns for our stockholders. As described in more detail under “Compensation Discussion and Analysis,” our compensation program for our senior executives is designed to achieve this objective by rewarding performance and encouraging actions that drive success in our business objectives.Recommendation:
Recommendation:
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEFOR ADOPTION OF THIS RESOLUTION ON THE ADVISORY (NON-BINDING) VOTE ON EXECUTIVE COMPENSATION.
PROPOSAL 4.4:
NON-BINDING STOCKHOLDER PROPOSAL FROMCHARTER AMENDMENT TO REPEAL THE TEAMSTERS
COMPANY’S ELECTION TO BE SUBJECT TO SECTION 3-804(C) OF THE MGCLSet forth in
The Board values the italicized text below isinput and insights of our Company’s stockholders and believes that effective stockholder engagement strengthens the Board’s role as an informed and engaged fiduciary. The Board meaningfully integrates the feedback it receives from stockholders into the Board’s review and assessment of our Company’s corporate governance policies. At our 2016 annual meeting of stockholders, a stockholder proposal (the “Teamsters’ Proposal”)recommending that we received from The Teamster Affiliates Pension Plan (the “Teamsters”), 25 Louisiana Ave. N.W., Washington, D.C. 20001. The Teamsters advised us that it is the beneficial owner of 20,500 shares of our common stock, which constitutes approximately 0.02% of our outstanding common stock. The italicized text below contains the Teamsters’ Proposal and supporting statement as submitted to us by the Teamsters. The Teamsters bear sole responsibility for the contents of the Teamsters’ Proposal and the supporting statement. If the Teamsters’ Proposal is properly presented at the Annual Meeting or at any adjournment or postponement thereof, the Teamsters’ Proposal will be voted upon by our stockholders.
The affirmative vote of a majority of all the votes cast on the Teamsters’ Proposal at the Annual Meeting or any adjournment or postponement thereof is necessary for approval of the proposal. If approved, the Teamsters’ Proposal would be a non-binding recommendation to the Board. This means the Board will have discretion to determine whether and when to implement the Teamsters’ Proposal if such proposal is approved by our stockholders.
Recommendation:
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEAGAINST THE TEAMSTERS’ PROPOSAL.
Teamsters’ Proposal (all in italics)
RESOLVED,that the shareholders ofSummit Hotel Properties, Inc.(the “Company”), urge the Board to take all steps necessary under applicable law to cause the Company to opt out of Maryland’s Unsolicited Takeover Act (Title 3, Subtitle 8 of the Maryland General Corporation Law, the “Act”), and to require a majority vote of shareholders before opting back into the Act.
SUPPORTING STATEMENT:
This proposal urges the Board to initiate the actions required for the Company to opt out of provisions of Maryland’s Unsolicited Takeover Act (Title 3, Subtitle 8 of the Maryland General Corporation Law). The Act permits the Board, without shareholder approval, to implement various takeover defenses, such as, classifying the Board, expanding the size of the Board while filling new vacancies through the votes of directors only, and requiring a two-thirds vote for removal of a director.
The statute essentially acts as a poison pill; these defenses, if implemented by the Board, may adversely affect shareholder value by discouraging offers to acquire the Company that could be beneficial to shareholders.
Much of the research on such anti-takeover statutes indicates that they fail to protect shareholder interests. Critics argue that insofar as they protect managers from removal, they reduce incentives for managers to operate as profitably as possible.1 Research on such anti-takeover statutes suggests that they fail to protect shareholder interests; for example, Boulton (2010) reports evidence that firms incorporated in takeover-friendly states have higher Tobin’s Q values — the ratio between the Market value of a company divided by the replacement value of the firm’s assets — than firms incorporated in takeover-unfriendly states. Lower Q values imply that the stock is undervalued,2 suggesting that state-level anti-takeover statutes negatively impact firm value.3 Bertrand and Mullainathan (2003) found that the following passage of state anti-takeover statutes, protected firms saw return on capital fall by 1% while managerial wages rose 4%.4
Not opting out of the Act may adversely affect shareholder value by discouraging premium-rich offers to acquire the Company that could be beneficial to shareholders.
We urge shareholders to ask the Board to protect shareholder value by similarly opting out of the Unsolicited Takeover Act, and vote FOR this proposal.
Our Statement in Opposition to the Teamsters’ Proposal
The Board has carefully considered the Teamsters’ Proposal that the Board take all steps necessary to cause the Company to opt out of all provisions of the MarylandMaryland’s Unsolicited Takeover Act (“MUTA”) and believes that it is not into require a majority vote of shareholders before opting back into MUTA received the best interestsaffirmative vote of 54% of the Company or itsvotes cast on the proposal. In light of the support of our stockholders to do so. In consideringfor the Teamsters’ Proposal,proposal, and based on discussions with our stockholders, the Board balancedapproved the speculative concerns raised by the Teamsters against the benefitsCompany’s opting out of maintaining flexible access toall provisions of MUTA and protecting the interests of all stockholders. As explained below, the Board believes that stockholders should voteAGAINSTthe Teamsters’ Proposal.
Overview of MUTA
The Company is prohibited from opting back into any of MUTA’s provisions without the prior approval of a Maryland corporation. MUTA permits a Maryland corporation with a classmajority vote of equity securities registered understockholders.
To begin such repeal and prohibition, the Securities Exchange Act of 1934,Company filed Articles Supplementary to the Company’s Charter on May 26, 2016, as amended,previously disclosed.
To complete such repeal and at least three independent directors,prohibition, an amendment to electour Charter is required to eliminate our specific election to be subject by provision in its charter or bylaws or a resolutionto Section 3-804(c) of its board of directors, notwithstanding any contrary charter or bylaw provisions, to any or all of five provisions, which provide that:
We believe that opting out of directors is required to remove a director. The Company is currently subject to this provision through its charter and/or bylaws;
The Company’s Status with Respect to MUTA and Governance Principles
The Board is not currently classified. The Company has elected by a specific provision in its charter to be subject to the provisions of MUTA relating to the filling of vacancies on the Board and the Company is subject to each of the other provisions of MUTA through charter and bylaw provisions. The Company is afforded the opportunity of operating under the safeguards of Maryland law and has determined it is in the best interests of stockholders and the Company to do so. The Board is committed to enhancing stockholder value and promoting sound governance principles through Company policies. We maintain several investor-friendly policies, including stock ownership guidelines, compensation clawback, anti-hedging and anti- pledging policies and employment agreements with non-compete provisions, a double trigger requirement for any severance payouts in connection with a change-in-control and no excise tax gross-up payments.
Applications of MUTA
MUTA, which has been Maryland law since 1999, was adopted by the Maryland legislature to provide an important set of tools for a board of directors to use to protect and enhance stockholder value by encouraging activist stockholders or others who may be seeking a coercive transaction to negotiate with the board, as the stockholders’ elected representatives. In this regard, the provisions of MUTA can be used to strengthen the Board’s ability to negotiate on behalf of all stockholders if an unsolicited takeover attempt should ever be made with respect to the Company.
The provisions of MUTA relate primarily to attempts to take control of a company by gaining control of the board, through a proxy contest or otherwise. In the face of unsolicited takeover attempts by certain third parties who can be focused on short-term financial gains, MUTA, specifically, the provisions permitting the Board to classify itself without stockholder approval and thus slow the pace of a potential acquirer by preventing it from replacing the entire Board in one election, can provide the Board with the time and flexibility necessary to evaluate the adequacy and fairness of a takeover proposal and consider alternatives for protecting and enhancing long-term stockholder value. Indeed, the stated purpose of MUTA is “to protect legitimate local interests against the abuses of hostile takeovers” by giving “a Maryland-based company the opportunity to have the time and flexibility it might need in responding to a hostile takeover attempt.” Time and flexibility may be particularly important in certain situations, such as following a steep decline in share price occasioned by circumstances outside the Company’s or the Board’s control (for example, a general market downturn, current market conditions affecting the entire U.S. lodging industry and lodging REITs in general, or an event that results in a share price that does not accurately reflect the intrinsic value of the Company).
The Teamsters’ Proposal would have stockholders vote to urge the Board to take all steps necessary to cause the Company to opt out of the important protections offered by MUTA and would require an affirmative majority vote of the Company’s stockholders before the Company could opt back in to MUTA. Hostile takeover attempts occur suddenly. Opportunistic acquirers move quickly and frequently use coercive tactics, which require the board of a target company to act quickly to defend the interests of the target company’s stockholders and maximize value for all of the company’s stockholders. Requiring the Board to obtain stockholder approval prior to utilizing the provisions of MUTA is not practical. Arranging a stockholder meeting is unlikely to be accomplished in the short period typically available for responding to an unsolicited takeover attempt. As a result, the Board’s ability to adopt certain takeover defenses and force a potential acquirer to negotiate with the Board to protect and enhance stockholder value would be severely limited.
The tools provided by MUTA, and in particular, the ability of a board to unilaterally classify itself, will not stop (nor should they stop) a fully financed premium bid for the Company, but it will prevent a sudden shift of parties who may have short-term goals such as a sale of the Company at a low price or on terms otherwise inconsistent with the best interests of the Company and all of itsour stockholders.
In conclusion, the Board has carefully considered the Teamsters’ Proposal that the Board take all steps necessary to cause the Company to opt out of MUTA and believes that it is not in the best interests of the Company or its stockholders to do so. The Board recommends that you vote
AGAINSTRecommendation: the Teamsters’ Proposal.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR A CHARTER AMENDMENT TO REPEAL THE COMPANY’S ELECTION TO BE SUBJECT TO SECTION 3-804(C) OF THE MGCL.
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
Our Board of Directors Structure
Stock Ownership Guidelines and Other Policies
Corporate Governance Guidelines
enhance long-term stockholder value. The Board has adopted Corporate Governance Guidelines, which provideare reviewed annually and periodically amended by the framework for the governance ofBoard to enhance our company and represent the Board’s current views with respect to selected corporate governance issues considered to be of significance to our stockholders.principles. A current copy of the Corporate Governance Guidelines can be found under “Investor Relations — Corporate Overview — Governance Documents” on our website atwww.shpreit.com. www.shpreit.com.
Code of Business Conduct and Ethics
The Board has establishedalso adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) that applies to all of our directors, officers and employees. The purpose of the Code of Ethics is to promote honest and ethical conduct and to promote compliance with all applicable rules and regulations that apply to our Company and our directors, officers and employees when such individuals are acting for or on our behalf.employees. A current copy of the Code of Business Conduct and Ethics can be found under “Investor Relations — Corporate Overview — Governance Documents” on our website atwww.shpreit.com. www.shpreit.com. Any waiver of the Code of Business Conduct and Ethics with respect to our executive officers or directors may be made only by the Board or one of our Board committees. We anticipate that any waivers of our Code of Business ConductBoard’s committees and Ethics will be posted timely on our website.
Our Company was built on relationships with investors, lenders, investment banks, franchise brand companies and with our third party management companies. Management strives to operate our Company with passion, integrity and excellence. We are committed to being open and transparent about our business practices and performance and remaining accountable for our conduct. We are also committed to our stockholders to create long-term value. We follow through on our commitment to stockholders by implementing what we believe are sound corporate governance practices, including:
· In May 2016, our Board unanimously approved a proposed charter amendment to eliminate our Company’s specific election to be subject to Section 3-804(c) of the MGCL and recommended that our stockholders approve the amendment. See also Proposal 4 in this proxy statement.
· In May 2016, we opted out of four of the five provisions of MUTA, Section 3-803, 3-804(a), 3-804(b) and 3-805 of the MGCL. See also Proposal 4 in this proxy statement regarding the remaining steps to complete the opting out process of the fifth MUTA provision.
· All of our directors must be elected annually.
· Our directors are subject to a director resignation policy as part of our policy on voting procedures with respect to the election of directors in uncontested elections.
· Eighty percent (80%) of our directors are independent.
· All members of the three standing committees of the Board are independent.
· Our independent directors meet regularly without the presence of any of our officers or employees.
· Our independent directors designate an independent, non-employee director to serve as our Lead Independent Director.
Based on current corporate governance standards, the Board believes all non-employee directors and certain key executive officers should own a meaningful equity interest in our Company to more closely align the interests of directors and executive officers with those of stockholders. Accordingly, the Board has adopted stock ownership guidelines for key executive officers and all non-employee directors.
For purposes of these guidelines, the term “Company common stock” includes, in addition to shares of our common stock, (a) any class of equity securities issued by our operating partnership, Summit Hotel OP, LP (the “Operating Partnership”), that are redeemable for shares of our common stock, whether held directly or indirectly, or by or for the benefit of, immediate family members, and (b) vested and unvested restricted shares of common stock, but excludes (x) stock options, whether exercisable or un-exercisable, (y) unearned performance-based restricted stock and (z) warrants and all other forms of derivative securities.
The Board reviews the minimum equity holdings guidelines for executive officers on a periodic basis to ensure the guidelines remain consistent with corporate governance best practices and continue to promote the alignment of executive and stockholder interests.
Over time, certain key executive officers are required to hold Company common stock with a value equal to a multiple of their then-current base salary. The equity ownership value for each of these executive officers will be calculated by multiplying the number of shares of Company common stock owned by the ten trading day trailing volume weighted average price (“VWAP”) of our common stock prior to the date of computation, typically at the end of the fiscal year. The executive officers named in the table below will have until January 1, 2018, to comply with the stock ownership guidelines. The equity ownership requirements for our key executive officers are as follows:
Name | Multiple of Base | |
Daniel P. Hansen, President and Chief Executive Officer | 6x | |
Greg A. Dowell, EVP & Chief Financial Officer | 2x | |
Craig J. Aniszewski, EVP & Chief Operating Officer | 2x | |
Christopher Eng, EVP & Chief Risk Officer | 1x |
Each non-employee director will be required to hold a number of shares of Company common stock equal to five times his annual cash retainer. The equity ownership value for each non-employee director will be calculated by multiplying the number of shares of Company common stock owned by the ten trading day trailing VWAP of our common stock prior to the date of computation, typically at the end of the fiscal year. Until such time as the required ownership level is achieved, each non-employee director is required to retain at least fifty percent (50%) of the net after-tax profit shares from vesting of equity awards. The Board reviews the minimum equity holdings guidelines for non-employee directors on a periodic basis to ensure the guidelines remain consistent with corporate governance best practices.
Anti-Hedging and Anti-Pledging Policies
The Board has adopted an insider trading policy that contains restrictions on hedging and pledging securities issued by us or our Operating Partnership. With respect to hedging, directors and executive officers are prohibited from engaging in any hedging or monetization transactions involving securities issued by us or our Operating Partnership. With respect to pledging, directors and executive officers are prohibited from holding securities issued by us or our Operating Partnership in a margin account or pledging these securities as collateral for a loan.
An exception to this anti-pledging policy may be granted if a director or executive officer desires to pledge securities issued by us or our Operating Partnership as collateral for a loan other than margin debt and clearly demonstrates the financial capacity to repay the loan without resort to the pledged securities. Any permitted pledge of securities must be pre-approved by our General Counsel. No director or executive officer has pledged securities as collateral for a loan.
The Board has adopted a compensation clawback policy that contains terms to ensure that executives are not unduly enriched in the event of a financial restatement. If our Company is required to restate its audited, consolidated financial results due to material non-compliance with financial requirements under securities laws as a result of intentional misconduct, fraud or gross negligence, each executive that is directly responsible for the intentional misconduct, fraud or gross negligence shall reimburse us for the after-tax value of the incentive compensation that would not have been earned if the restated financial information had been reported initially. In addition, the Board may withhold from executives not directly responsible for the intentional misconduct, fraud or gross negligence future awards with equivalent value to that of the after-tax value of the awards initially made to such executive on the basis of the restated financial results, but only to the extent such awards were made within the preceding 24 months.
Our Board of Directors has established a succession policy for the Chief Executive Officer to cover emergency and other possible occurrences resulting in a vacancy in the position of Chief Executive Officer.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
We are managed under the direction of our Board. Our directors are: Daniel P. Hansen, Dr. Bjorn R. L. Hanson, Jeffrey W. Jones, Kenneth J. Kay and Thomas W. Storey. Mr. Hansen is the Chairman of the Board and Mr. Jones is our lead independent director (“Lead Independent Director”). Each of our directors stands for election annually.
Our Corporate Governance Guidelines require that a majority of our directors be “independent,” with independence determined in accordance with the applicable standards of the NYSE. The Board may determine a director to be independent if the Board has affirmatively determined that the director has no material relationship with us or our subsidiaries, either directly, or as a stockholder, director, officer or employee of an organization that has a relationship with us or our subsidiaries. The Board has determined that Dr. Hanson, Mr. Jones, Mr. Kay and Mr. Storey have no material relationship with us or our subsidiaries and therefore, are independent under the applicable standards of the NYSE. As a result, a majority of our directors are independent. Mr. Hansen serves as an executive officer and is not considered independent under the applicable standards of the NYSE.
The Board has established three standing committees:
The members of these standing committees are appointed byCommittee, and serve at the discretion of the Board. Current copies of the chartershas adopted a written charter for each committee. A copy of these committees can be foundeach committee charter is available on our website at www.shpreit.com under the heading “Investor Relations — Corporate Overview — Governance Documents” on our website atwww.shpreit.com.Documents.”
The members of the Audit Committee are Mr. Jones (Chairman)(Chair), Dr. Hanson, Mr. Kay and Mr. Storey. Each of these membersmember has been determined to be “independent” within the meaning of the applicable standards of the NYSE and Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).Act. In addition, each of these membersmember meets the financial literacy requirements for audit committee membership under the NYSE’s rules and the rules and regulations of the SEC. The Board has determined that Dr. Hanson, Mr. Jones and Mr. Kay each is an “audit committee financial expert” as such term is defined in Item 407(d)(5)(ii) of Regulation S-K.
The Audit Committee is responsible for reviewing and discussing with management and our independent public accountants our annual and quarterly financial statements, engaging independent public accountants, reviewing with the independent public accountants the plans and results of the audit engagement, approving professional services provided by the independent public accountants, reviewing the performance and independence of the independent public accountants, considering audit and non-audit fees and reviewing the adequacy of our internal accounting controls, our internal audit functions and Sarbanes-Oxley Act compliance. The Audit Committee has the power to investigate any matter brought to its attention within the scope of its duties and to retain counsel or outside advisors for this purpose where appropriate. Additionally, the Audit Committee is responsible for monitoring our procedures for compliance with the rules for taxation as a real estate investment trust (“REIT”) under Sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”).amended.
The members of the Compensation Committee are Mr. Kay (Chairman)(Chair), Dr. Hanson, Mr. Jones and Mr. Storey. The BoardEach member has been determined that each member of the Compensation Committee isto be “independent” within the meaning of the applicable standards of the NYSE. Each member of the Compensation Committee qualifies as an “outside director” as such term is defined under Section 162(m) of the Code and as a “non-employee director” for purposes of Rule 16b-3 of the Exchange Act.
The Compensation Committee exercises all powers delegated to it by the Board in connection with compensation matters. The Compensation Committee is responsible for the review and approval of the compensation and benefits of our executive officers, administration and recommendations to the Board regarding our compensation and long-term incentive plans, and production of the annual reports on executive compensation for inclusion in our proxy statements.
In connection with those responsibilities, the Compensation Committee has the sole authority to retain and terminate compensation consultants employed by it to help evaluate our compensation programs. The Compensation Committee also has authority to grant awards under the Company’s 2011 Equity Incentive Plan as Amended and Restated (“Equity Incentive Plan”).
Nominating and Corporate Governance Committee
The
The members of the Nominating and Corporate Governance Committee are Dr. Hanson (Chairman)(Chair), Mr. Jones, Mr. Kay and Mr. Storey. The BoardEach member has been determined that each member of the Nominating and Corporate Governance Committee isto be “independent” within the meaning of the applicable standards of the NYSE.
The Nominating and Corporate Governance Committee is responsible for monitoring our compliance with corporate governance requirements of state and federal law, and the rules and regulations of the NYSE; developing and recommending to the Board criteria for prospective members of the Board; conducting Board candidate searches and interviews; overseeing and evaluating the Board and management; monitoring compliance with our codeCode of business conduct and ethicsEthics and policies with respect to conflicts of interest; reviewing and approving interested transactions pursuant to our related party transaction policy; periodically evaluating the appropriate size and composition of the Board, and recommending, as appropriate, increases, decreases and changes in the composition of the Board; and formally proposing the slate of nominees for election as directors at each annual meeting of our stockholders. In addition, this committee annually facilitates the assessmentevaluation of each Committee and the Board’s performance as a whole and of the individual directors and reports thereon to the Board.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Dr. Hanson, Mr. Jones, Mr. Kay and Mr. Storey. None of the members are, or have been one of, our employees or officers. None of our executive officers currently serves, or during the past fiscal year has served, as a member of the board of directors or compensation committee of another entity that has one or more executive officers serving on our Board or Compensation Committee.
The Board believes it is important to retain the flexibility to allocate the responsibilities of the positions of the Chairman of the Board and the Chief Executive Officer in the way it believes is in our best interest. Currently, the Board believes that it is in our best interest not to splitseparate these positions. Mr. Storey is currently the Non-ExecutiveHansen, our Chief Executive Officer, was appointed Chairman of the Board and assumed the role effective January 2017. Mr. Storey served as our Non-Executive Chairman from July 30, 2015 upon the resignation of former Executive Chairman Kerry W. Boekelheide.until Mr. Hansen’s appointment.
To promote the independence of the Board and appropriate oversight of management and to demonstrate our commitment to strong corporate governance, the independent directors designatehave designated an independent, non-employee director to serve as our Lead Independent Director. The Lead Independent Director helps to facilitate free and open discussion and communication among the independent, non-employee directors. The responsibilities of the Lead Independent Director are set forth in our Corporate Governance Guidelines, which is available under “Investor Relations — Corporate Overview — Governance Documents” on our website at www.shpreit.com.Guidelines. Dr. Hanson was our Lead Independent Director in 2016. Mr. Jones was appointed Lead Independent Director on June 15, 2015.and assumed the role effective January 2017.
The Board is actively involved in the oversight of risks that could affect our company.Company. This oversight is conducted primarily through the Audit Committee but also through the other committees of the Board, as appropriate. The Board and its committees satisfy this responsibility through reports by each committee chair regarding the committee’s considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks within our Company.
In 2015,2016, the Board met four times in person and ninefive times telephonically, the Audit Committee met four times in person and fivethree times telephonically, the Compensation Committee met four times in person and six timesone time telephonically, and the Nominating and Corporate Governance Committee met four times in person and two times telephonically.person. Each of our currently serving directors attended at least 75% of the aggregate meetings of the Board and the committees of the Board on which he served during 2015.2016.
Executive Sessions of Our Independent Directors
As required by the NYSE rules, the non-employee directors, all of whom are independent under the applicable standards of the NYSE, regularly meet in executive session, without management present. Generally, these executive sessions follow regularly scheduled meetings of the Board and following regularly scheduled meetings of the three standing committees. The independent, non-employee directors met in executive session following regularly scheduled meetings in 2015. The Non-Executive Chairman of the Board2016. Mr. Storey or the Lead DirectorDr. Hanson presided over the executive sessions of the Board, and the respective ChairmanChair of each committee presided over each such committee’s executive sessions.
Before each annual meeting of stockholders, the Nominating and Corporate Governance Committee considers the nomination of all directors who are up for election at the next annual meeting of stockholders and also considers new candidates whenever there is a vacancy on the Board, or whenever a vacancy is
anticipated due to a change in the size or composition of the Board, a retirement of a director or for any other reason. In addition to considering incumbent directors, the Nominating and Corporate Governance Committee may identify director candidates based on recommendations from the directors, stockholders, management and others.
The Nominating and Corporate Governance Committee works with the Board to determine the appropriate characteristics, skills and experience for the Board as a whole and its individual members. In evaluating the suitability of individuals for Board membership, the Nominating and Corporate Governance Committee takes into account many factors, including:including, but not limited to:
·whether the individual meets the requirements for independence;
·the individual’s general understanding of the various disciplines relevant to the success of a large publicly-traded company in today’s business environment;
·the individual’s understanding of the Company’s businesses and markets;
·the individual’s professional expertise and educational background; and
·other factors that promote diversity of views and experience.
The Nominating and Corporate Governance Committee evaluates each individual in the context of the Board as a whole, with the objective of recommending a group of directors that can best perpetuate the success of theour business and represent stockholder interests through the exercise of sound judgment, using its diversity of experience. In determining whether to recommend a director for re-election, the Nominating and Corporate Governance Committee also considers the director’s past attendance at meetings and participation in and contributions to the activities of the Board.
We do not have a formal policy about diversity of Board membership, but the Nominating and Corporate Governance Committee considers a broad range of factors when nominating director candidates to the Board, including differences of viewpoint, professional experience, education, skill, other personal qualities and attributes, race, gender and national origin. The Nominating and Corporate Governance Committee neither includes nor excludes any candidate from consideration solely based on the candidate’s diversity traits.
For purposes of the 20172018 annual meeting of stockholders, the Nominating and Corporate Governance Committee will consider appropriate nominees for directors whose names are submitted in writing by a stockholder. Subject to the discretion of the Nominating and Corporate Governance Committee, we anticipate that any director candidates submitted to us by our stockholders will be evaluated by the Nominating and Corporate Governance Committee on the same basis as any other director.
Policy on Voting Regarding Directors
The Board has adopted a policy on voting regarding directors. Under the policy, at any meeting of stockholders at which members of the Board are to be elected by the stockholders in an uncontested election, any nominee for director who receives a greater number of votes “withheld” from his or her election than votes “for” his or her election will submit to the Board a written offer to resign from the Board no later than two weeks after the certification of the voting results. An uncontested election is one in which the number of individuals who have been nominated for election as a director is equal to, or less than, the number of directors to be elected.
The Nominating and Corporate Governance Committee will consider the resignation offer and, within 60 days after the certification of the voting results, recommend to the Board whether to accept or reject the resignation offer. In determining its recommendation to the Board, the Nominating and Corporate Governance Committee will consider all factors it deems relevant, which may include, (i) any stated reason or reasons why stockholders cast “withheld” votes for the director, (ii) the qualifications of the director, and (iii) whether the director’s resignation from the Board would be in our best interest and the best interests of our stockholders. The Nominating and Corporate Governance Committee may also consider alternatives to acceptance or rejection of the resignation offer as the Nominating and Corporate Governance Committee members deem appropriate.
The Board will act on the Nominating and Corporate Governance Committee’s recommendation no later than 90 days after the certification of the voting results. The Board will consider the information, factors and alternatives considered by the Nominating and Corporate Governance Committee and additional information, factors and alternatives the Board deems relevant. The recommendation of the Nominating and Corporate Governance Committee will not be binding on the Board.
Any director who offers to resign as provided above will not participate in the Nominating and Corporate Governance Committee’s or the Board’s consideration of whether to accept his or her resignation offer.
If a director’s resignation offer is accepted by the Board, the Nominating and Corporate Governance Committee will recommend to the Board whether to fill the vacancy created by such resignation or to reduce the number of directors constituting the Board. The Board will determine the treatment of any compensation due or payable to the resigning director.
If a majority of the members of the Nominating and Corporate Governance Committee were required to offer their resignations, the remaining independent directors will appoint a special committee of the Board to consider the resignation offers and whether to accept the resignation offers.
We will publicly disclose the Board’s decision in a Current Report on Form 8-K filed with the SEC, the Board’s decision,including an explanation of the process by which the decision was made and, if applicable, the reasons for rejecting the resignation offer.
Stock Ownership Guidelines
Based on current corporate governance standards, the Board believes all non-employee directors and certain key executive officers should own a meaningful equity interest in our company to more closely align the interests of directors and executive officers with those of stockholders. Accordingly, the Board has adopted stock ownership guidelines for key executive officers and all non-employee directors.offer(s).
For purposes of these guidelines, the term “Company common stock” includes, in addition to shares of our common stock, (a) any class of equity securities issued by our operating partnership, Summit Hotel OP, LP, that are redeemable for shares of our common stock (the “Operating Partnership”), whether held directly or indirectly or by or for the benefit of immediate family members, and (b) vested and unvested restricted shares of common stock, but excludes (x) stock options, whether exercisable or unexercisable, (y) unearned performance-based restricted stock and (z) warrants and all other forms of derivative securities.
The Board reviews the minimum equity holdings guidelines for executive officers on a periodic basis to ensure the guidelines remain consistent with corporate governance best practices and continue to promote the alignment of executive and stockholder interests.
Over time, certain key executive officers are required to hold Company common stock with a value equal to a multiple of their then current base salary. The equity ownership value for each of these executive officers will be calculated by multiplying the number of shares of Company common stock owned by the ten trading day trailing volume weighted average price (“VWAP”) of our common stock prior to the date of computation, typically at the end of the fiscal year. The executive officers named in the table below will have until January 1, 2018 to comply with the stock ownership guidelines. The equity ownership requirement for our key executive officers is as follows:
| | |
Each non-employee director will be required to hold a number of shares of Company common stock equal to $250,000. The equity ownership value for each non-employee director will be calculated by multiplying the number of shares of Company common stock owned by the ten trading day trailing VWAP of our common stock prior to the date of computation, typically at the end of the fiscal year. Until such time as
the required ownership level is achieved, each non-employee director is required to retain at least fifty percent (50%) of the net after-tax profit shares from vesting of equity awards. The Board reviews the minimum equity holdings guidelines for non-employee directors on a periodic basis to ensure the guidelines remain consistent with corporate governance best practices.
Anti-Hedging and Anti-Pledging Policies
The Board has adopted an insider trading policy that contains restrictions on hedging and pledging securities issued by us and the Operating Partnership. With respect to hedging, directors and executive officers are prohibited from engaging in any hedging or monetization transactions involving securities issued by us or the Operating Partnership. With respect to pledging, directors and executive officers are prohibited from holding securities issued by us or the Operating Partnership in a margin account or pledging these securities as collateral for a loan. An exception to this anti-pledging policy may be granted if a director or executive officer desires to pledge securities issued by us or the Operating Partnership as collateral for a loan other than margin debt and clearly demonstrates the financial capacity to repay the loan without resort to the pledged securities. Any permitted pledge of securities must be pre-approved by the Company’s General Counsel.
Compensation Clawback Policy
The Board has adopted a compensation clawback policy that contains terms to ensure that executives are not unduly enriched in the event of a financial restatement. If the Company is required to restate its audited, consolidated financial results due to material non-compliance with financial requirements under securities laws as a result of intentional misconduct, fraud or gross negligence, each executive that is directly responsible for the intentional misconduct, fraud or gross negligence shall reimburse the Company for the after tax value of the incentive compensation that would not have been earned if the restated financial information had been reported initially. In addition, the Board may withhold from executives not directly responsible for the intentional misconduct, fraud or gross negligence, future awards with equivalent value to that of the after tax value of the awards initially made to such executive on the basis of the restated financial results, but only to the extent such awards were made within the preceding twenty-four months.
Communication with the Board
Stockholders and other interested parties who wish to communicate with the Board, including any non-employee director, or the non-employee directors as a group, or any individual director or directors, may do so by writing to the Chair of the Nominating and Corporate Governance Committee, Board of Directors of Summit Hotel Properties, Inc., 12600 Hill Country Boulevard, Suite R-100, Austin, Texas 78738. The independent, non-employee directors have procedures for the handling of communications from stockholders and other interested parties and have directed our Secretary to act as their agent in processing any communications received. All communications that relate to matters within the scope of the responsibilities of the Board and its standing committees are to be forwarded to the Chair of the Nominating and Corporate Governance Committee. Communications that relate to matters that are within the scope of the responsibilities of one of the Board’s standing committees are also to be forwarded to the chair of the appropriate committee.
Communications that relate to ordinary business matters that are not within the scope of the responsibilities of the Board are to be sent to the appropriate member of management. Solicitations, junk mail and obviously frivolous or inappropriate communications will not be forwarded, but will be made available to any non-managementnon-employee director who wishes to review them.
Policy Governing Director Attendance at Annual Meetings of Stockholders
We expect each of our directors to attend the Annual Meeting of Stockholdersannual meeting unless doing so would be impracticable due to unavoidable conflicts. In 2015,2016, all of our directors attended our Annual Meeting of Stockholders.annual meeting.
Compensation Committee Interlocks and Insider Participation
Currently, the Compensation Committee consists of Dr. Hanson, Mr. Jones, Mr. Kay and Mr. Storey. None of the members are or have been one of our employees or officers. None of our executive officers currently serves, or during the past fiscal year has served, as a member of the board of directors or compensation committee of another entity that has one or more executive officers serving on our Board or Compensation Committee.
DIRECTOR COMPENSATION
Directors who are our employees (Mr. Hansen) do not receive compensation for their services as directors. For 2015,2016, our non-employee director compensation program consisted of the following:following, which remains unchanged for 2017, unless otherwise noted:
·Annual Cash Retainer. We paid an annual cash retainer of $50,000 to each non-employee director.
·Lead Independent Director Fee.For 2015, we We paid our Lead Independent Director a $30,000$20,000 Lead Independent Director fee.
·Non-Executive Chairman Fee. We paid our former Non-Executive Chairman a $20,000 Non-Executive Chairman fee. Because in 2017 our Chairman is an executive officer, a Non-Executive Chairman Fee will not be paid in 2017.
·Additional Committee Membership Fee. We paid an additional fee for membership on each of our standing committees, as follows: each member of the Audit Committee was paid $12,500, each member of the Compensation Committee was paid $10,000 and each member of the Nominating and Corporate Governance Committee was paid $7,500. The chair of each respective committee is not paid a committee membership fee.
·Additional Committee Chairperson Fee. In lieu of the membership fee, we paid the Chairs of each of our standing committees an additional fee, as follows: the Chair of the Audit Committee was paid $25,000, the Chair of the Compensation Committee was paid $20,000 and the Chair of the Nominating and Corporate Governance Committee was paid $15,000.
·Annual Equity Award. Following the 2016 annual meeting of stockholders, we granted each non-employee director an equity award consisting of 8,045 shares of our common stock with an aggregate value of approximately $100,000 (the number of shares awarded to each non-employee director was determined by dividing $100,000 by the VWAP of our common stock on the NYSE for the ten trading days preceding the grant date). These shares were granted on May 19, 2016, pursuant to our Equity Incentive Plan and were fully vested on the grant date.
·Election to Receive Stock in Lieu of Cash Fees. Non-employee directors have the option to elect to receive all or any part of the cash fees we are required to pay them in fully vested shares of our common stock issued under our Equity Incentive Plan or another stockholder-approved plan, based upon the VWAP of our common stock on the NYSE for the ten trading days preceding the grant date. In 2015,2016, Mr. Storey was entitled to a total of $81,250$95,000 in cash fees for his services as a director. Mr. Storey elected to receive these fees in shares of our common stock in lieu of cash. Accordingly, we issued an aggregate of 6,2467,618 shares of our common stock to Mr. Storey.
Based on the recommendation of Frederic W. Cook & Co, Inc., the Compensation Committee’s independent compensation consultant, the Compensation Committee recommended and the Board approved the changes to our non-employee director compensation program for 2016.
We reimburse our non-employee directors for reasonable out-of-pocket expenses incurred in connection with the performance of their duties as directors, including without limitation, travel expenses in connection with their attendance at in-person board and committee meetings. Non-employee directors do not receive any meeting fees for attending meetings of the Board or its committees.
The table below summarizes the compensation paid by us to our non-employee directors for 2015.2016.
Name |
| Fees Earned |
| Stock Awards |
| Total ($) |
|
Bjorn R. L. Hanson |
| 110,000 |
| 92,678 |
| 202,678 |
|
Thomas W. Storey |
| (1) |
| 186,570 |
| 186,570 |
|
Jeffrey W. Jones |
| 92,500 |
| 92,678 |
| 185,178 |
|
Kenneth J. Kay |
| 90,000 |
| 92,678 |
| 182,678 |
|
| | | | |||||||||
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | |||||||||
| Bjorn R. L. Hanson | 109,375 | 98,169 | 207,544 | |||||||||
| Thomas W. Storey | (2) | 178,335 | 178,335 | |||||||||
| Jeffrey W. Jones | 90,539 | 98,169 | 188,708 | |||||||||
| Kenneth J. Kay | 89,420 | 98,169 | 187,589 | |||||||||
| | | | | ||||||||||||
(2) Amounts reflect the aggregate grant date fair value, which has been calculated in accordance with Accounting Standards Codification (“ASC”) 718, compensation of the stock awards granted to each of our non-employee directors in 2016. These stock awards are described in the table appearing below.
Grant Date |
| Grantee |
| Number of |
| Aggregate |
| Reason for Grant |
February 18, 2016 |
| Thomas W. Storey |
| 2,062 |
| 21,115 |
| Election to receive stock in lieu of cash director fees |
May 19, 2016 |
| Bjorn R. L. Hanson |
| 8,045 |
| 92,678 |
| Annual equity award |
May 19, 2016 |
| Thomas W. Storey |
| 8,045 |
| 92,678 |
| Annual equity award |
May 19, 2016 |
| Jeffrey W. Jones |
| 8,045 |
| 92,678 |
| Annual equity award |
May 19, 2016 |
| Kenneth J. Kay |
| 8,045 |
| 92,678 |
| Annual equity award |
May 19, 2016 |
| Thomas W. Storey |
| 2,011 |
| 23,167 |
| Election to receive stock in lieu of cash director fees |
August 18, 2016 |
| Thomas W. Storey |
| 1,778 |
| 24,554 |
| Election to receive stock in lieu of cash director fees |
December 1, 2016 |
| Thomas W. Storey |
| 1,767 |
| 25,056 |
| Election to receive stock in lieu of cash director fees |
All shares of common stock granted to our non-employee directors in 20152016 were fully vested on the grant date and were issued pursuant to our Equity Incentive Plan. The aggregate grant date fair valueAggregate Grant Date Fair Value of the stock awards has been calculated based on the market value of our common stock on the date of grant.
COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
The
This Compensation Discussion and Analysis (“CD&A”) describesprovides you with information on the material elements of ourCompany’s executive compensation program, how it is designed to support our business objectives,programs and practices, and the compensation decisions that the Compensation Committee has made under the programprogram. This CD&A focuses on compensation of our named executive officers for our “named executive officers,” who for 2015 were as follows:2016, which were:
Name | Title | |
Daniel P. Hansen | President and Chief Executive Officer | |
Craig J. Aniszewski | Executive Vice President and Chief Operating Officer | |
Greg A. Dowell | Executive Vice President and Chief Financial Officer | |
Christopher R. Eng | Executive Vice President, General Counsel, | |
Paul Ruiz | Vice President and Chief Accounting Officer |
2015
Executive Summary
The overall performance of our
Our diverse portfolio of premium select-service hotels was strongperformed exceptionally well in 2015,2016, with growth in all key financial metrics and continuation of our track record of outperformance versus market indices. In each of the last fourfive years, our portfolio has outperformed the Smith Travel Research upscale revenue per available room (“RevPAR”) growth rate by an average of nearly 200 basis points. This track record of outperformance demonstrates our ability to actively manage the portfolio and drive shareholder value.
Notable accomplishments in 20152016 include:
·Same-store RevPAR increased by 8.2% as comparedgrew to 2014.
·Adjusted funds from operations (“AFFO”) for the full year were $108.6increased to $123.8 million, or $1.25$1.41 per diluted share, as compared to our AFFO target of $1.09 per share and representing a 28%an increase over 2014 actualin AFFO per share.diluted share of 13.1% over the same period in 2015. A reconciliation of funds from operations (“FFO”) and AFFO to our GAAPgenerally accepted accounting principles (“GAAP”) net income for the year ended December 31, 20152016, is included in our Annual Report on Form 10K10-K filed on February 24, 201623, 2017, with the SEC (“Annual Report”).
·Adjusted earnings before income taxes, depreciation and amortization (“Adjusted EBITDA”) increased to $166.5 million from $153.6 million from $127.9 million in 2014,2015, an increase of 20%8.4%. A reconciliation of earnings before income taxes, depreciation and amortization (“EBITDA”) and Adjusted EBITDA to our net income in accordance with Generally Accepted Accounting Principles (“GAAP”)withGAAP for the year ended December 31, 20152016, is included in our Annual Report.
·In accordance with our strategic business plan to create long-term stockholder value, we acquired sevenfour hotels containing 1,042749 guestrooms, for a total purchase price of $237.8$244.2 million, with an average RevPAR of $156.13 per hotel and we disposed of ten hotels containing 1,0901,212 guestrooms, for a totalan aggregate sales price of $150.1$147.3 million, with an average RevPAR of $85.43 per hotel.
· We announced common dividend increases in April and October of 12.8% and 22.6% respectively, resulting in an annualized dividend rate of $0.65 per share.
· We achieved a total stockholder return (“TSR”) of 40.2% compared to a TSR of 23.9% for the SNL U.S. REIT Hotel Index (“REIT Index”). We achieved a 3-year TSR of 101.94% compared to a TSR of 26.55% for the REIT Index.
· In October 2016, we redeemed all 2,000,000 shares of our issued and outstanding 9.25% Series A Cumulative Preferred Stock for approximately $50.0 million.
2015
· In June 2016, we issued 3,000,000 shares of 6.45% Series D Cumulative Preferred Stock for gross proceeds of $75.0 million.
Our executive compensation program has been designed to meet the following objectives:
Our executive compensation program consists of base salary, annual cash incentive compensation opportunities and annual long-term equity incentive grants. Our program is designed to be straightforward, transparent and market-based and to comply with sound corporate governance practices.
The following chart summarizes, forbelow contains the key components of our executive compensation program, the purpose of each of these components, the objectives and key featurescomponent and the compensation decisions made by the Committeeprocess for our named executive officers for 2015:determining each component.
Compensation | | | ||
Description and Objectives | 2016 Highlights | |||
Base Salary | Fixed cash compensation set at a level reflective of each executive’s performance, market conditions, and competitive | The Compensation Committee increased base salaries of each of the named executive officers in | ||
Annual Cash Incentive Compensation | Performance-based cash incentive that rewards achievement of annual company-specific and individual performance objectives. | 2016 annual cash incentives were tied to AFFO per share and RevPAR growth, | ||
Long-Term Equity Incentives | Equity incentives that align executive compensation with total stockholder return over multi-year performance and vesting periods | In | ||
| Because our |
Corporate Governance Highlights
Compensation Best Practice Policies
We maintain several investor-friendlystockholder-friendly compensation policies, including stock ownership guidelines, a compensation clawback policy, and anti-hedging and anti-pledging policies (refer to “— Corporate“Corporate Governance Principles and Board Matters” for more detail on these policies). In addition, our employment agreements with executive officers have non-compete provisions, require a double trigger for any severance payouts in connection with a change-in-control and do not provide excise tax gross-up payments.
Results of Stockholder Say-on-Pay Votes
At our 2015 annual meeting
Each year, the Compensation Committee considers the outcome of stockholders, our stockholders had the opportunity to cast an annualstockholder advisory (non-binding) vote on executive compensation. Approximately 95%compensation when making decisions relating to the compensation of our named executive officers and our executive compensation program design, structure and policies.
In 2016, stockholders continued their significant support for our executive compensation program with over 99% of the votes cast on this “2015 say-on-pay vote” were voted in favor of the proposal. We believe“say-on-pay” proposal at our 2016 annual meeting of stockholders. The Compensation Committee believes that the overwhelmingvoting results, together with the over 94% approval received over the last
three years, conveyed our stockholders’ strong support of our stockholders for the 2015 say-on-pay vote proposal indicates that our stockholders are supportivephilosophy, design and structure of our approachexecutive compensation program. The Compensation Committee will continue to consider the results of the stockholders’ say-on-pay votes when making decisions about our executive compensation.compensation program.
Objectives of Our Executive Compensation Program
Our executive compensation philosophy is designed to promote the following objectives:
· Assist in attracting and retaining talented and well-qualified executives and stockholders by motivating executives to increase stockholder value and rewarding executives when stockholder value increases;
· Motivate our executives to manage our business to meet our near-, medium- and long-term objectives and reward them for meeting these objectives and forin the case of exceptional performance;
· Align the interest of our executives and retaining talented and well-qualified executives;
· Maintain high standards of ownership of our stock.
corporate governance.
Compensation Decision-Making Process
Role of the Compensation Committee and Management
The Compensation Committee is charged with, among other things,responsible for determining the responsibilityamount and composition of reviewing executive officer compensation policies and practices to ensure adherence to our compensation philosophies and that the total compensation paid to our Chief Executive Officer and all other executive officers is fair, reasonable and competitive, taking into account our competitive position within our industry and our named executive officers’ level of expertise and experience in their positions.officers. The Compensation Committee’s primary responsibilities with respect to determining executive compensation are:
Theofficer. Additionally, the Compensation Committee reviews and considers the recommendations of Mr. Hansen our President and Chief Executive Officer, with respect to compensation decisions of our named executive officers other than himself. The Compensation Committee makes all compensation decisions with regard to our named executive officers. The Compensation Committee believes it is valuable to consider the recommendations of Mr. Hansen with respect to these matters because, given his knowledge of our operations and the day-to-day responsibilities of our executive officers, he is in a unique position to provide the Compensation Committee perspective into the performance of our executive officers in light of our business at a given point in time.
Role of the Compensation Consultant
For the development of our 2015 compensation program, the
The Compensation Committee has retained FTI Consulting,Frederic W. Cook & Co, Inc. (“FTI Consulting”FW Cook”) as its independent compensation consultant. The Compensation Committee has determined that FW Cook meets the criteria for an independent consultant to review the appropriate compensationin accordance with SEC guidelines for our named executive officers as comparedsuch service. FW Cook reports directly to other real estate companies, including our 2015 peer group, which is discussed below. FTI Consulting provided the Compensation Committee with advisory services only with respect to executive compensation and workedworks with management only at the request and under the direction of the Compensation Committee. In setting executive compensation for 2015,To assist the Compensation Committee instructed FTI Consulting toin the development of our 2016 compensation program, FW Cook conducted a comprehensive review of our executive compensation program in terms of the competitiveness of our target compensation components for the prior year’s program, advise the Compensation Committee onopportunities and the appropriateness of the components of the prior year’s program and recommend changes for 2015. FTI Consulting met regularly with the Compensation Committee and provided the Compensation Committee with executive compensation studies and independent analysis regarding executive compensation trends.our incentive programs in supporting our business strategy. On March 3, 2015,8, 2016, the Compensation Committee, based on the recommendations of FTI Consulting,FW Cook, established the terms of our 20152016 executive compensation program. See “— Elements of 2015 Executive Compensation Program” below.
In general, the Compensation Committee uses comparative data from various companies in certain peer groups as a guide in its review and determination of base salaries, annual cash bonuses and restricted stockannual equity awards. During 2015, the Compensation Committee reviewed peer group data to assist in its determination regarding compensation for our named executive officers.
In late 2015, the Compensation Committee, with the help of FTI Consulting,FW Cook, determined the composition and the criteria and data used in compiling ourthe peer group list. The 2015used to evaluate the competitiveness of our existing executive compensation program. The peer group consisted of 12 public REITs that primarily invest in hotels, and fivefour other public REITs outside of the hotel sector, that arewhich were comparable in terms of market capitalization size and executive team members that the Compensation Committee and FTI ConsultingFW Cook considered to be the most relevant peers. For purposes of making executive compensation decisions for 2015,target pay opportunities for 2016, our peer group consisted of the following companies:
| | |
Ashford Hospitality Trust, Inc. | Pebblebrook Hotel Trust | |
Chatham Lodging Trust | RLJ Lodging Trust | |
Chesapeake Lodging Trust | ||
Ryman Hospitality Properties, Inc. | ||
DiamondRock Hospitality Company | Rouse Properties | |
FelCor Lodging Trust | STAG Industrial, Inc. | |
First Potomac Realty Trust | Sunstone Hotel Investors, Inc. | |
Hersha Hospitality Trust | Terreno Realty Corporation | |
LaSalle Hotel Properties | Xenia Hotels & Resorts, Inc. |
In late 2016, FW Cook reviewed our peer group to determine whether it remained reasonable for future executive compensation comparisons. For year-over-year consistency, FW Cook recommended and the Compensation Committee approved using the same peer group, as adjusted for merger and acquisition transactions. One company, Rouse Properties, was acquired and therefore was removed from the peer group.
Elements of 2016 Executive Compensation
2016 Target Direct Compensation (“TDC”)
Total TDC for 2016 is described below and consists of salary, annual cash incentives and long-term equity incentives. The Compensation Committee considered the mix of the three components of TDC and intentionally weighted the long-term equity incentive component the highest to align executives’ compensation with long-term stockholder value. The Company’s TDC mix is generally consistent with the mix of TDC used by companies in members in our peer group.
Name |
| Salary ($) |
| Annual Cash |
| Long-Term |
| Total Target |
|
Daniel P. Hansen |
| 700,000 |
| 1,050,000 |
| 2,400,000 |
| 4,150,000 |
|
Craig J. Aniszewski |
| 430,000 |
| 430,000 |
| 1,000,000 |
| 1,860,000 |
|
Greg A. Dowell |
| 375,000 |
| 375,000 |
| 750,000 |
| 1,500,000 |
|
Christopher R. Eng |
| 300,000 |
| 300,000 |
| 300,000 |
| 900,000 |
|
Paul Ruiz |
| 275,000 |
| 193,000 |
| 200,000 |
| 667,500 |
|
(1) This reflects the “target” level payout of our annual cash incentive award program.
(2) This reflects the “target” level value of long-term incentive awards consisting 60% of performance share awards and 40% of time based awards. The Compensation Committee determines the intended target dollar value. The number of shares issued to each executive is determined by dividing the value of the award by the average of the trailing 10-day VWAP of our common stock prior to the date of grant.
2016 Target Annual Compensation (“TAC”)
Total TAC for 2016 is described below and consists of salary and annual cash incentives. For 2016, the Compensation Committee implemented a plan to compensate our executives at comparable levels to our peer group. TAC for our executives as compared to members of our peer group is as follows:
Name | 2016 TAC | Comparison to Peer Group | ||
Daniel P. Hansen | $1,750,000 | At the median | ||
Craig J. Aniszewski | $860,000 | Approximately at the median | ||
Greg A. Dowell | $750,000 | Approximately at the median | ||
Christopher R. Eng | $600,000 | Below the 25th percentile | ||
Paul Ruiz | $468,000 | Between the median and 75th percentile |
In addition2016 Compensation Elements
Our compensation program seeks to the peer group listed above, due to the limited numberpromote our compensation philosophy and objectives through an appropriate mix of REITs with an executive chairman who does not also serve as the chief executive officer, a supplemental peer group was created for the sole purposethree core elements of determining Mr. Boekelheide’s compensationcompensation: Base Salary, Cash Incentive Compensation and included the following companies: Ashford Hospitality Trust, Inc.; CBL & Associates Properties, Inc.; DCT Industrial Trust, Inc.; Getty Realty Corporation; Hersha Hospitality Trust; Lexington Realty Trust; Pennsylvania Real Estate Investment Trust; Retail Opportunity Investments Corp.; RLJ Lodging Trust; and Weingarten Realty Investors.Long-Term Incentive Compensation.
Elements of 2015 Executive Compensation
Base salaries are designed to provide a fixed level of compensation that serves as a retention tool. Base salaries are reviewed annually by the Compensation Committee and are subject to annual increases at the discretion of the Compensation Committee. In determining base salary increases for 2015,2016, the Compensation Committee considered each executive officer’s individual performance and corporate performance, as well as our company’s overall performance, market conditions and competitive salary information for the peer group described above. ForFW Cook’s competitive analysis indicated that 2015 base salaries approved by the Compensation Committee to be paid tofor our named executive officers on an annual basis are outlined below. Adjustments were made to each executive’s base salary to be further aligned withbelow the peer group levels.median, and in some cases below the peer group 25th percentile. Based on the competitive review as well as the factors outlined above, the Compensation Committee increased base salaries for 2016 as follows:
| | | | ||||||||||||||||||
| Named Executive Officer | 2015 Base Salary | 2014 Base Salary | Percentage Increase | ||||||||||||||||||
| Kerry W. Boekelheide* | $ | 443,000 | $ | 436,000 | 1.6 | % | |||||||||||||||
Name |
| 2016 |
| 2015 |
| Percentage Increase |
| ||||||||||||||
| Daniel P. Hansen | $ | 575,000 | $ | 450,000 | 27.8 | % |
| $ | 700,000 |
| $ | 575,000 |
| 22% |
| ||||||
| Craig J. Aniszewski | $ | 375,000 | $ | 350,000 | 7.1 | % |
| $ | 430,000 |
| $ | 375,000 |
| 15% |
| ||||||
| Greg A. Dowell | $ | 360,000 | $ | 350,000 | 2.9 | % |
| $ | 375,000 |
| $ | 360,000 |
| 4% |
| ||||||
| Christopher R. Eng | $ | 260,000 | $ | 250,000 | 4.0 | % |
| $ | 300,000 |
| $ | 260,000 |
| 15% |
| ||||||
| Paul Ruiz | $ | 260,000 | $ | 225,000 | 15.6 | % |
| $ | 275,000 |
| $ | 260,000 |
| 6% |
| ||||||
20152.Cash Incentive Awards (Cash Bonuses)Compensation Program.
Our 20152016 annual incentive program was designed to provide the named executive officers (other than Mr. Ruiz) anand opportunity to earn cash compensation based on the achievement of company-specific performance goals and the executive’s achievement of individual performance goals. On March 3, 2015,
The performance measures and weightings established by our Compensation Committee for 2016 under our cash incentive compensation program are set forth below.
Corporate |
| Weight |
| Threshold |
| Target |
| Maximum |
| Actual |
|
2016 AFFO per share |
| 60% |
| $1.27 |
| $1.34 |
| $1.41 |
| $1.41 |
|
2016 RevPAR Growth |
| 20% |
| 3.25% |
| 4.25% |
| 5.25% |
| 3.30% |
|
Individual Performance |
| 20% |
| Specific for each individual |
| Specific for each individual |
| Specific for each individual |
| * |
|
* The amount earned, if any, under the Company entered into incentive award agreements with Mr. Hansen, Mr. Dowell, Mr. Aniszewski and Mr. Eng setting forthIndividual Performance component was determined by the terms and conditionsCompensation Committee, in its sole discretion, based on the Compensation Committee’s evaluation of the incentive awards. On April 24, 2015,executive’s performance against quantitative and qualitative objectives set forth at the Company entered into an incentive award agreement with Mr. Boekelheide setting forth the terms and conditionsbeginning of the incentive award.
The majority of each executive’s 2015 annual incentive was tied to corporate performance objectives (“Corporate Performance Component”). Each executive also had the opportunity to earn an additional 25% of his maximum annual incentive opportunity for the achievement of individual performance objectives (the “Individual Performance Component”). The following table summarizes each named executive officer’s annual incentive opportunity for 2015.
| | | | | ||||||||||||
| Annual Incentive Opportunity (% of Base Salary) | Annual Incentive Opportunity (% of Base Salary) | |||||||||||||||
| Corporate Performance Component | Individual Performance Component | |||||||||||||||
| Executive | Threshold | Target | Maximum | Maximum | ||||||||||||
| Kerry W. Boekelheide* | 75 | % | 125 | % | 175 | % | 43.75 | % | ||||||||
| Daniel P. Hansen | 100 | % | 150 | % | 200 | % | 50 | % | ||||||||
| Craig J. Aniszewski | 50 | % | 75 | % | 100 | % | 25 | % | ||||||||
| Greg A. Dowell | 50 | % | 75 | % | 100 | % | 25 | % | ||||||||
| Christopher R. Eng | 35 | % | 55 | % | 75 | % | 18.75 | % | ||||||||
The Corporate Performance Component of the overall annual incentive award for each executive officer in 2015 was based on three measures designed to best support the Company’s short term objectives. The three performance measures, their weightings and range of goals,year, as well as our actual performance in 2015, are summarized inassessment of the following table:individual’s contributions to the Company during 2016. In determining whether the Individual Performance component had been earned, the Compensation Committee did not rely on any one particular objective or formula but rather on a holistic evaluation of the individual’s performance. No executive officer was guaranteed an award under the Individual Performance component. Payouts under the Individual Performance component could range from 15% of base salary to 60% of base salary for Mr. Hansen; 10% of base salary to 40% of base salary for Messrs. Aniszewski, Dowell and Eng; and 7% of base salary to 28% of base salary for Mr. Ruiz.
| | | | | | |||||||||||||||
| Corporate Performance Measure | Weight | Threshold | Target | Maximum | Actual | |||||||||||||||
| 2015 AFFO per share | 60 | % | $ | 1.03 | $ | 1.09 | $ | 1.15 | $ | 1.25 | ||||||||||
| 2015 RevPAR Growth | 30 | % | 5 | % | 6.5 | % | 8 | % | 8.20 | % | ||||||||||
| 2015 Acquisitions Volume | 10 | % | $ | 75 million | $ | 125 million | $ | 175 million | $ | 237.8 million | ||||||||||
For purposes of the 20152016 annual incentive program AFFO per share was calculated as our net income or loss per share as set forth in our audited consolidated financial statements for the year ending December 31, 2015,2016, less preferred dividends and excluding gains (or losses) from sales of property and impairment losses, plus depreciation and amortization (including amortization of deferred financing costs and amortization of franchise royalty fees), as further adjusted to exclude hotel transaction and pursuit costs and such other items, including nonrecurring expenses, as the Compensation Committee determined appropriate and consistent with the purpose and intent of the incentive awards. A reconciliation of AFFO to our GAAP net income for the year ended December 31, 20152016, is set forforth in our Annual Report. The 20152016 RevPAR component was calculated as a year over yearyear-over-year comparison of RevPAR growth for our same store hotels (hotels owned for the entire year ended December 31, 20142015, and the entire year ending December 31, 2015,2016, excluding assets held for sale). Acquisitions were calculated as the total combined gross purchase price of hotels acquired in 2015.
For the 20152016 Individual Performance Componentcomponent of the annual incentive program, the Compensation Committee established individual performance metrics for the named executive officers in the first quarter of 2015.2016. Objectives were personal to each executive and varied based upon the executive’s position and responsibilities as they related to the Company’s overall business plan. A summary of each executive’s objectives are as follows:
·Mr. Hansen’s objectives primarily involved increasing Company EBITDA margin and creation of a portfoliobroadening the Company’s investor base, identifying strategic value creation initiative to build long-term stockholder value;
·Mr. Aniszewski’s objectives primarily involved growing RevPAR at a minimum of 6.5% or maintaining a RevPAR index of 110% for our same store hotels, increasing GOP margin, and achieving targeted revenue flow through to gross profit;
·Mr. Dowell’s objectives primarily involved increasing Company EBITDA margin, integratingmanaging the implementation of a new corporatecyber security analysis and response plan, improving system integration to align our accounting, softwareoperations and creatingfinance departments and implementing formal processescreation of a hybrid model for IT efficiencies;internal audit consisting of both external and
·Mr. Eng’s objectives primarily involved identifying top five corporate riskscreation of a new records retention policy, updating the Company’s risk, communication and formalizing planscrisis planning manuals, and contribution to improve mitigationthe implementation of a cyber-security analysis and maintenanceresponse plan; and testing
· Mr. Ruiz’s objectives primarily involved successfully implementing a new reporting system to further automate SEC reporting documentation and SOX control documentation, reducing overall Company expense on use of outside vendors for accounting and compliance services, and the completion of the Company’s crisis management plan.
In determining whether
The annual incentive opportunity ranges for 2016, and the 2015actual cash incentive compensation earned and paid for 2016 performance as a percentage of base salary, were as follows:
|
| 2016 Cash Incentive Opportunity |
| 2016 Cash Incentive |
| 2016 Cash |
| ||||
Name |
| Threshold |
| Target |
| Maximum |
| % of Base Salary |
| $ |
|
Daniel P. Hansen |
| 75% |
| 150% |
| 300% |
| 256% |
| 1,790,250 |
|
Craig J. Aniszewski |
| 50% |
| 100% |
| 200% |
| 171% |
| 733,150 |
|
Greg A. Dowell |
| 50% |
| 100% |
| 200% |
| 168% |
| 629,375 |
|
Christopher R. Eng |
| 50% |
| 100% |
| 200% |
| 167% |
| 501,500 |
|
Paul Ruiz |
| 35% |
| 70% |
| 140% |
| 112% |
| 308,963 |
|
The following table sets forth the payouts under the AFFO per share component, the RevPAR Growth component and the Individual Performance Component was earned, the Compensation Committee did not rely on any one particular objective or formula in determining appropriate short-term incentives, but rather on what the Compensation Committee considered to be value-added quantitative and qualitative goals in furtherance of the Company’s strategic goals. No executive officer was guaranteed an award under the 2015 Individual Component and, if performance was unsatisfactory, no amounts would be paid under the component.
Based on our maximum performance on the measures for the Corporate Performance Component and the Committee’s determinationcomponent that each executive achieved his respective individual performance goals for the Individual Performance Component, each executive, except Mr. Boekelheide, earned the maximum bonus for 2015, which is reflected in the Non-Equity2016:
Name |
| AFFO per share |
| RevPAR Growth |
| Individual |
| Total 2016 Cash |
|
Daniel P. Hansen |
| 1,260,000 |
| 110,250 |
| 420,000 |
| 1,790,250 |
|
Craig J. Aniszewski |
| 516,000 |
| 45,150 |
| 172,000 |
| 733,150 |
|
Greg A. Dowell |
| 450,000 |
| 39,375 |
| 140,000 |
| 629,375 |
|
Christopher R. Eng |
| 360,000 |
| 31,500 |
| 110,000 |
| 501,500 |
|
Paul Ruiz |
| 231,000 |
| 20,213 |
| 57,750 |
| 308,963 |
|
3.Long-Term Incentive Compensation Awards column of the Summary Compensation Table. As a result of Mr. Boekelheide’s resignation, he did not receive compensation under the 2015 annual incentive program.
In February 2016, the Compensation Committee approved and we paid a discretionary cash bonus to Mr. Ruiz in the amount of $195,000 for services provided in 2015. The amount paid was based on corporate performance in 2015 and also on Mr. Ruiz’s individual contributions made to the Company in 2015.
2015 Long-Term Equity Incentives
Long-term equity incentives granted in 20152016 consisted of a combination of performance-based and time-based stock awards. The Compensation Committee determined a target total long-term incentive grant value for each named executive officer. For all executives, other than Messrs. Boekelheide and Ruiz, awards were granted 60% in the form of performance-based stock and 40% in the form of time-based stock. For Messrs. Boekelheide and Ruiz, awards consisted 100% of time-based stock.
| | | | ||||||||||||||||
| Executive | Performance- Based Stock Target Value | Time-Based Stock Value | Total LTI Grant Value at Target | ||||||||||||||||
| Kerry W. Boekelheide | $ | 0 | $ | 225,000 | $ | 225,000 | |||||||||||||
Name |
| Performance-Based Stock |
| Time-Based Stock |
| Total LTI Grant |
| ||||||||||||
| Daniel P. Hansen | $ | 1,200,000 | $ | 800,000 | $ | 2,000,000 |
| $1,440,000 |
| $960,000 |
| $2,400,000 |
| ||||||
| Craig J. Aniszewski | $ | 400,000 | $ | 275,000 | $ | 675,000 |
| $600,000 |
| $400,000 |
| $1,000,000 |
| ||||||
| Greg A. Dowell | $ | 375,000 | $ | 250,000 | $ | 625,000 |
| $450,000 |
| $300,000 |
| $750,000 |
| ||||||
| Christopher R. Eng | $ | 100,000 | $ | 65,000 | $ | 165,000 |
| $180,000 |
| $120,000 |
| $300,000 |
| ||||||
| Paul Ruiz | $ | 0 | $ | 500,000 | (1) | $ | 500,000 |
| $120,000 |
| $80,000 |
| $200,000 |
| |||||
The Compensation Committee granted these stock awards under the Company’s Equity Incentive Plan. The number of shares granted was based on the VWAP of our common stock for the ten trading days preceding the grant date ($13.43 for the March 3, 2015 grants and $13.29 for Mr. Boekelheide’s April 24, 2015 grant).date. Note that the grant-date fair value,values, as reported in the Summary Compensation tableTable and the Grants of Plan-Based Awards table, differ from the values shown in the table above because the grant-date fair value of the performance-based awardsaward is based on a Monte Carlo value and the grant-date fair value of the time-based awardsaward is based on the closing share price on the grant date.
Performance-Based Stock Awards
Sixty-percent of each executive’s total long-term equity incentive was granted in the form of performance-based shares tied to the Company’s relative TSR versus theconstituent companies inof the REIT Index. The number of shares that may be earned can range from 0 to 200% of the target shares granted, based on our relative TSR percentile rank over the three-year performance period starting January 1, 2015March 8, 2016, and ending December 31, 2017,March 8, 2019, according to the following table:
| | |||
Company 3-Year TSR Percentile Rank | Percent | |||
<30th Percentile | 0% | |||
30th Percentile | 25% | |||
55th Percentile | 100% | |||
> | 200% | |||
The number of shares earned will be linearly interpolated for performance between the 30th and 55th percentile and for performance between the 55th and 80th percentile. In addition, if the Company’s absolute TSR is equal to or greater than 8.5% per year (or 25.5% cumulative over the Performance Period), at least 25% of the performance-based shares will be earned.
The Company has entered into stock award agreements with the above-named executive officers, effective as of March 3, 2015,8, 2016, setting forth the terms and conditions of the performance-based stock awards. Except as described below, no performance-based shares will vest unless the executive remains in the continuous employ of the Company from the date of grant until January 1, 2018.March 8, 2019. On and after the date of the grant and prior to forfeiture of any of the performance-based shares, the executives will have the right to vote the shares that
have been issued (i.e., the target number). Cash dividends on the performance-based shares will be accumulated and will only be paid to the executives to the extent the underlying performance-based share is earned.
If a “change in control” (as defined in the Company’s Equity Incentive Plan), occurs prior to the conclusion of the Performance Period, the performance-based shares will be earned based on the Company’s relative or absolute TSR performance up to the date of the change in control, and any earned shares will be fully vested.vested on the third anniversary of the grant date (the end of the original performance period), subject to acceleration if either (a) the successor entity does not assume or replace the award, or (b) the participant is terminated without cause or for good reason. Under these circumstances, the executives will be entitled to receive any dividend equivalent payments to which they are entitled under the terms of the stock award agreements.
If an executive’s employment is terminated on account of death or disability, termination without cause or voluntary termination for good reason, the performance-based shares may be earned contingent upon the attainment of the relative or absolute TSR performance hurdles at the end of the Performance Period. However, the number of performance-based shares earned by the executive, and the amount of any dividend equivalent payments to which the executive is entitled pursuant to the terms of the stock award agreement, will be reducedadjusted pro rata based on the amount of time the executive was employed by the Company during the Performance Period.
For purposes of the performance-based stock awards, the Company’s TSR will be calculated based on the ten-day volume weighted average priceVWAP of the Company’s common stock for the ten trading days ending on, and including, December 31, 2017,March 8, 2019, or, if earlier, the control change date, minus $12.44$10.96 (the closing sale priceVWAP of the Company’s common stock for the ten trading days ending on, December 31, 2014)and including, March 7, 2016), plus any dividends paid on the Company’s common stock during the Performance Period and assuming reinvestment of dividends at the closing price of the Company’s common stock on the date the dividend was paid, all divided by $12.44.$10.96. The TSR for each Index Company will be calculated in the same manner.
Time-Based Stock Awards.Awards
Forty percent of each executive’s total long-term equity incentive was granted in the form of time-based shares granted under the Company’s Equity Incentive Plan. The Company entered into stock award agreements with the executive officers setting forth the terms and conditions of the time-based stock awards. The stock award agreements for Messrs. Hansen, Dowell, Aniszewski and Eng provide for vesting over a three-year period as follows: 25% of shares will vest on March 9, 2016;2017; 25% of the shares will vest on March 9, 2017;2018; and 50% of the shares will vest on March 9, 2018. The stock award agreement for Mr. Ruiz provides for full vesting of all of the shares on March 9, 2018 as the grant was a retention award. The stock award agreement for Mr. Boekelheide provided for vesting over a three-year period as follows: 33% of shares would have vested on April 24, 2016; 33% of the shares would have vest on April 24, 2017; and 33% of the shares would have vested on April 24, 2018. See “— Severance and Release Agreement with Mr. Boekelheide”.2019.
Except as described below, no time-based shares will vest unless the executive remains in the continuous employ of the Company from the date of grant until the applicable vesting date. However, all ofIf a “change in control” (as defined in the Company’s Equity Incentive Plan) occurs prior to vesting and if the successor entity does not assume or replace the time-based shares, (if not sooner vested)they will vest on a “control change date” (as, as defined in the Equity Incentive Plan)Plan, if the executive remains in the continuous employ of the Company from the date of grant until the control change date. In addition, all of the time-based shares (if not sooner vested), will vest on the date that the executive’s employment with the Company ends on account of the executive’s death or disability, or if the executive’s employment is terminated without cause, or if the executive resigns for good reason.
Any time-based shares that have not vested as described above may not be transferred and will be forfeited on the date the executive’s employment with the Company terminates. On and after the date of grant and prior to forfeiture of any time-based shares, the executive will have the right to vote the time-based shares and to receive, free of all restrictions, all dividends declared and paid on the Company’s common stock, whether or not vested.
Elements of 2016 Executive Compensation Program
In the fourth quarter of 2015, the Compensation Committee retained Frederic W. Cook & Co, Inc. (“FW Cook”) to provide the Compensation Committee with advisory services with respect to executive and Board compensation. FW Cook worked with management only at the request and under the direction of the Compensation Committee. FW Cook conducted a comprehensive review of the compensation components of the 2015 executive compensation programs and made recommendations for changes to better support our
business objectives. Based on FW Cook’s advice, as well as other factors, the Compensation Committee approved the elements of the 2016 program for Messrs. Hansen, Aniszewski, Dowell, Eng and Ruiz as outlined below:
2016 Annual Base Salary. For 2016, the Compensation Committee approved increases to base salaries to bring them closer to competitive median levels. 2016 annual base salaries for the Company’s executive officers are as follows:
| | |||
| Named Executive Officer | 2016 Base Salary | |||
| Daniel P. Hansen | $ | 700,000 | ||
| Craig J. Aniszewski | $ | 430,000 | ||
| Greg A. Dowell | $ | 375,000 | ||
| Christopher R. Eng | $ | 300,000 | ||
| Paul Ruiz | $ | 275,000 | ||
2016 Incentive Awards (Cash Bonuses). Our 2016 annual incentive program is generally consistent with the 2015 program, with the exception of the following changes.
| | | | |||||||||
| Annual Incentive Opportunity (% of Base Salary) | ||||||||||||
| Executive | Threshold | Target | Maximum | |||||||||
| Daniel P. Hansen | 75 | % | 150 | % | 300 | % | ||||||
| Craig J. Aniszewski | 50 | % | 100 | % | 200 | % | ||||||
| Greg A. Dowell | 50 | % | 100 | % | 200 | % | ||||||
| Christopher R. Eng | 50 | % | 100 | % | 200 | % | ||||||
| Paul Ruiz | 35 | % | 70 | % | 140 | % | ||||||
For 2016, the goals established by the Compensation Committee for the annual incentive program relate to:
AFFO per share will be calculated as the Company’s net income or loss as set forth in its audited consolidated financial statements for the year ending December 31, 2016, excluding gains (or losses) from sales of property, plus depreciation and amortization (including amortization of deferred financing costs and amortization of franchise application fees), as further adjusted to exclude hotel transaction and pursuit costs, equity based compensation, debt transaction costs, gain (or loss) on derivative instruments and such other items, including nonrecurring expenses, as the Compensation Committee determines is appropriate and consistent with the purpose and intent of the incentive awards. . If any transactions occur, the effect of the transactions on actual 2016 AFFO per share will be evaluated by the Compensation Committee, and in the
Compensation Committee’s discretion, an appropriate adjustment may be made to the threshold, target and maximum levels of budgeted AFFO per share to give effect of those transactions. Same-store RevPAR growth will be calculated as a year over year comparison of RevPAR growth for the Company’s hotels owned for the entire year ended December 31, 2015 and the entire year ending December 31, 2016. Individual Performance goals have been established with respect to each executive officer’s individual performance and contribution to the Company in 2016.
No amount will be paid under the AFFO Component, the RevPAR Component or the Individual Performance Component if the threshold level of performance is not achieved. No additional amounts will be paid under the AFFO Component, the RevPAR Component or the Individual Performance Component if actual performance exceeds the maximum level of performance established by the Compensation Committee.
2016 Long-Term Equity Incentives
The Committee approved the following target total long-term incentive grant values for each executive, awarded 60% in the form of performance-based stock and 40% in the form of time-based stock:
| | | | |||||||||
| Executive | Performance- Based Stock Target Value | Time-Based Stock Value | Total LTI Grant Value at Target | |||||||||
| Daniel P. Hansen | $ | 1,440,000 | $ | 960,000 | $ | 2,400,000 | ||||||
| Craig J. Aniszewski | $ | 600,000 | $ | 400,000 | $ | 1,000,000 | ||||||
| Greg A. Dowell | $ | 450,000 | $ | 300,000 | $ | 750,000 | ||||||
| Christopher R. Eng | $ | 180,000 | $ | 120,000 | $ | 300,000 | ||||||
| Paul Ruiz | $ | 120,000 | $ | 80,000 | $ | 200,000 | ||||||
The Compensation Committee granted these stock awards under the Company’s Equity Incentive Plan. The number of shares granted was based on the VWAP of our common stock for the ten trading days preceding the March 8, 2016 grant date of $10.96.
The terms of the 2016 performance-based awards are generally the same as the terms of the 2015 awards, with the following exceptions:
The terms of the 2016 time-based awards are substantially the same as for the 2015 time-based awards, except in the event of a change in control during the vesting period, vesting of unvested shares will only accelerate if either a) the surviving or successor entity in the change in control does not assume or replace the
shares with a comparable grant covering common stock of the surviving or successor entity, or b) in the event of the executive’s death, disability, termination without cause or voluntary termination for good reason.
Other Benefits; 401(k) Plan
We provide benefits such as medical, dental and life insurance and disability coverage for all of our employees, including our named executive officers. We also provide personal paid time off and other paid holidays to all employees, including the named executive officers. We believe that our employee benefit plans are an appropriate element of compensation and are necessary to attract and retain employees.
We maintain a retirement savings plan under section 401(k) of the Internal Revenue Code to cover our eligible employees. We currently match 100% of each eligible participant’s contributions, within prescribed limits, up to 3% of such participant’s base salary and 50.0%50% of each eligible participant’s contributions up to an additional 2% of the participant’s base salary. In 2015,2016, Messrs. Hansen, Dowell, Aniszewski, Eng and Ruiz each received $10,600 in matching contributions and Mr. Dowell received $8,129. In addition, we reserve the right to make additional discretionary profit sharing contributions on behalf of eligible participants. Based on Company performance in 2015, Messrs. Hansen, Aniszewski, Dowell, Eng and Ruiz each received $5,904 in discretionary profit sharing contributions pursuant to the terms of our 401(k) plan. The amounts were deposited into the executives’ 401(k) accounts in March 2016.contributions.
To specify our expectations with regard to our executive officers’ duties and responsibilities, and to provide greater certainty with regard to the amounts payable to our executive officers in connection with certain terminations or change in control events, the Board has approved and we have entered into employment agreements with each of our executive officers. We believe that the terms of the employment agreements provide these executives with day-to-day employment stability, and enable them to properly focus their attention on their duties and responsibilities with the company, thereby promoting productivity. The employment agreements are described in more detail under “— Employment Agreements,” and “— Potential Payments Upon Termination or Change in Control” below.
Severance and Release Agreement with Mr. Boekelheide
On July 30, 2015, in connection with Mr. Boekelheide’s resignation, the Company entered into a severance and release agreement with Mr. Boekelheide (the “Agreement”). The Agreement provided for a severance payment to Mr. Boekelheide in the gross amount of $1,950,000, and accelerated vesting of all previously awarded restricted shares of common stock and options.
Tax Deductibility of Executive Compensation
The Compensation Committee considers the anticipated tax treatment to the companyCompany and the executive officers in its review and establishment of compensation programs and payments. The deductibility of some types of incentive compensation payments can depend upon the timing of the executive’s vesting or exercise of previously granted rights. Interpretations of and changes in applicable tax laws and regulations, as well as other factors beyond the committee’s control, also can affect deductibility of compensation. The Compensation Committee’s general policy is to maintain flexibility in compensating executive officers in a manner designed to promote varying corporate goals. Accordingly, the compensation committee has not adopted a policy that all compensation must be deductible.
ASC 718 requires us to recognize an expense for the fair value of equity-based compensation awards. Grants of equity awards under our Equity Incentive Plan will be accounted for under ASC 718. The Compensation Committee will regularly consider the accounting implications of significant compensation decisions, especially in connection with decisions that relate to our equity plans and programs. As accounting standards change, we may revise certain programs to appropriately align accounting expenses of our equity awards with our overall executive compensation philosophy and objectives.
Risk Considerations in our Executive Compensation Program
The Compensation Committee has assessed our compensation program for the purpose of reviewing and considering any risks presented by our compensation policies and practices that are likely to have a material adverse effect on us. As part of that assessment, management reviewed the primary elements of our compensation program, including base salary, annual bonus opportunities, equity compensation and severance arrangements. Management’s risk assessment included a review of the overall design of each primary element of our compensation program, and an analysis of the various design features, controls and approval rights in place with respect to compensation paid to management, and other employees, that mitigate potential risks to us that could arise from our compensation program. Following the assessment, management determined that our compensation policies and practices did not create risks that were reasonably likely to have a material adverse effect on us and reported the results of the assessment to the Compensation Committee.
Stock Ownership Guidelines for Executive Officers
We have adopted stock ownership guidelines for our executive officers, including our named executive officers. For more information, please see “Corporate Governance Matters — Stock Ownership Guidelines.”COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Summit Hotel Properties, Inc. has reviewed and discussed the Compensation Discussion and Analysis appearing in this proxy statement with management of the Company. Based on the Compensation Committee’s review of the CD&A and the Compensation Committee’s discussions of the CD&A with management, the Compensation Committee recommended to the Board (and the Board has approved) that the CD&A be included in the Company’s proxy statement on Schedule 14A prepared in connection with the annual meeting.
Compensation Committee of the Board: | |
Kenneth J. Kay (Chair) | |
Bjorn R. L. Hanson | |
Jeffrey W. Jones | |
Thomas W. Storey | |
, 2017 |
The table below summarizes the total compensation paid or earned by each of our named executive officers for the fiscal year ended December 31, 2015.2016.
Name and |
| Year |
| Base |
| Bonus |
| Stock |
| Option |
| Non-Equity |
| All Other |
| Total |
|
Daniel P. Hansen; |
| 2016 |
| 700,000 |
| — |
| 2,815,489 |
| — |
| 1,790,250 |
| 10,600 |
| 5,316,339 |
|
President and CEO |
| 2015 |
| 575,000 |
| — |
| 2,483,986 |
| — |
| 1,437,500 |
| 10,600 |
| 4,507,086 |
|
|
| 2014 |
| 450,000 |
| — |
| 1,185,597 |
| — |
| 1,068,750 |
| 10,400 |
| 2,714,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Craig J. Aniszewski; |
| 2016 |
| 430,000 |
| — |
| 1,173,123 |
| — |
| 733,150 |
| 10,600 |
| 2,346,873 |
|
EVP and COO |
| 2015 |
| 375,000 |
| — |
| 836,397 |
| — |
| 468,750 |
| 10,600 |
| 1,690,747 |
|
|
| 2014 |
| 350,000 |
| — |
| 344,899 |
| — |
| 415,625 |
| 10,400 |
| 1,120,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greg A. Dowell; |
| 2016 |
| 375,000 |
| — |
| 879,845 |
| — |
| 629,375 |
| 10,600 |
| 1,894,820 |
|
EVP, CFO |
| 2015 |
| 360,000 |
| — |
| 776,255 |
| — |
| 450,000 |
| 8,129 |
| 1,594,384 |
|
|
| 2014 |
| 87,500 |
| 75,000 |
| — |
| — |
| — |
| — |
| 162,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher R. Eng; |
| 2016 |
| 300,000 |
| — |
| 351,932 |
| — |
| 501,500 |
| 10,600 |
| 1,164,032 |
|
EVP, General Counsel and Chief Risk Officer |
| 2015 |
| 260,000 |
| — |
| 205,321 |
| — |
| 243,750 |
| 10,600 |
| 719,671 |
|
| 2014 |
| 250,000 |
| — |
| 107,782 |
| — |
| 221,875 |
| 42,538 |
| 622,195 |
| |
|
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
|
Paul Ruiz; |
| 2016 |
| 275,000 |
| — |
| 234,623 |
| — |
| 308,963 |
| 10,600 |
| 829,186 |
|
VP and CAO |
| 2015 |
| 260,000 |
| 195,000 |
| 503,722 |
| — |
| — |
| 10,600 |
| 969,322 |
|
|
| 2014 |
| 225,000 |
| 75,000 |
| — |
| — |
| — |
| 5,476 |
| 305,476 |
|
| | | | | | | | | ||||||||||||||||||||||||
| Name and Principal Position | Year | Base Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total ($) | ||||||||||||||||||||||||
| Kerry W. Boekelheide* Executive Chairman of the Board | 2015 | 261,673 | — | 1,194,649 | 152,727 | — | 1,960,600 | 3,569,649 | ||||||||||||||||||||||||
| 2014 | 436,000 | — | 531,805 | — | 899,250 | 10,400 | 1,877,455 | |||||||||||||||||||||||||
| 2013 | 400,000 | — | 537,498 | — | 325,000 | 10,200 | 1,272,698 | |||||||||||||||||||||||||
| Daniel P. Hansen President and CEO | 2015 | 575,000 | — | 2,483,986 | — | 1,437,500 | 10,600 | 4,507,086 | ||||||||||||||||||||||||
| 2014 | 450,000 | — | 1,185,597 | — | 1,068,750 | 10,400 | 2,714,747 | |||||||||||||||||||||||||
| 2013 | 400,000 | — | 1,074,297 | — | 325,000 | 10,200 | 1,809,497 | |||||||||||||||||||||||||
| Craig J. Aniszewski EVP and COO | 2015 | 375,000 | — | 836,397 | — | 468,750 | 10,600 | 1,690,747 | ||||||||||||||||||||||||
| 2014 | 350,000 | — | 344,899 | — | 415,625 | 10,400 | 1,120,924 | |||||||||||||||||||||||||
| 2013 | 325,000 | — | 236,631 | — | 210,938 | 142,850 | 915,419 | |||||||||||||||||||||||||
| Greg A. Dowell EVP, CFO and Treasurer | 2015 | 360,000 | — | 776,255 | — | 450,000 | 8,129 | 1,594,384 | ||||||||||||||||||||||||
| 2014 | 87,500 | 75,000 | — | — | — | — | 162,500 | |||||||||||||||||||||||||
| 2013 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Christopher R. Eng SVP, General Counsel, Chief Risk Officer and Secretary | 2015 | 260,000 | — | 205,321 | — | 243,750 | 10,600 | 719,671 | ||||||||||||||||||||||||
| 2014 | 250,000 | — | 107,782 | — | 221,875 | 42,538 | 622,195 | |||||||||||||||||||||||||
| 2013 | 165,000 | — | 99,994 | — | 82,500 | 10,200 | 357,694 | |||||||||||||||||||||||||
| Paul Ruiz VP and CAO | 2015 | 260,000 | 195,000 | 503,722 | — | — | 10,600 | 969,322 | ||||||||||||||||||||||||
| 2014 | 225,000 | 75,000 | — | — | — | 5,476 | 305,476 | |||||||||||||||||||||||||
| 2013 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
(2) Amounts in this column represent the incremental fair value, computed in accordance with ASC 718. For more information regarding the assumptions made by us in the valuation of these modified stock options, see Note 2 (“Summary of Significant Accounting Policies — Equity Based Compensation) and Note 10 (“Equity-Based Compensation”) to our audited consolidated financial statements included in our Annual Report.
(3) Amounts in this column represent aggregate cash payouts pursuant to the Corporate Performance components and the Individual Performance component of the cash incentive awards granted to our named executive officers under our Equity Incentive Plan.
(4) For 2016 and 2015, the amounts in the “All Other Compensation” column reflect contributions made by us to each of our named executive officers’ 401(k) accounts. For 2014, amounts in the “All Other Compensation” column reflect contributions made by us to each of our named executive officers’ 401(k) defined contribution plans in the following amounts: Mr. Hansen — $10,400; Mr. Aniszewski — $10,400; Mr. Eng — $10,400; and Mr. Ruiz - $5,476; and moving expenses in the amount of $32,138 reimbursed by us to Mr. Eng in connection with his relocation to Austin, Texas.
The table below sets forth information with respect to plan-based awards granted in 20152016 to our named executive officers:
|
|
|
| Estimated Future Payouts |
| Estimated Future Payouts |
| All Other |
| All Other |
| Exercise |
| Grant |
| ||||||||
Name |
| Grant |
| Threshold |
| Target |
| Maximum |
| Threshold |
| Target |
| Maximum |
| of Stock |
| Options |
| Awards |
| Awards |
|
Daniel P. Hansen |
| 3/8/16(1) |
| 420,000 |
| 840,000 |
| 1,680,000 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| 3/8/16(2) |
| 105,000 |
| 210,000 |
| 420,000 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| 3/8/16(3) |
| — |
| — |
| — |
| 32,847 |
| 131,387 |
| 262,774 |
| — |
| — |
| — |
| 1,809,068 |
|
|
| 3/8/16(4) |
| — |
| — |
| — |
| — |
| — |
| — |
| 87,591 |
| — |
| — |
| 1,006,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Craig J. Aniszewski |
| 3/8/16(1) |
| 172,000 |
| 344,000 |
| 688,000 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| 3/8/16(2) |
| 43,000 |
| 86,000 |
| 172,000 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| 3/8/16(3) |
| — |
| — |
| — |
| 13,686 |
| 54,745 |
| 109,490 |
| — |
| — |
| — |
| 753,784 |
|
|
| 3/8/16(4) |
| — |
| — |
| — |
| — |
| — |
| — |
| 36,496 |
| — |
| — |
| 419,339 |
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
Greg Dowell |
| 3/8/16(1) |
| 150,000 |
| 300,000 |
| 600,000 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| 3/8/16(2) |
| 37,500 |
| 75,000 |
| 150,000 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| 3/8/16(3) |
| — |
| — |
| — |
| 10,265 |
| 41,059 |
| 82,118 |
| — |
| — |
| — |
| 565,341 |
|
|
| 3/8/16(4) |
| — |
| — |
| — |
| — |
| — |
| — |
| 27,372 |
| — |
| — |
| 314,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher R. Eng |
| 3/8/16(1) |
| 120,000 |
| 240,000 |
| 480,000 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| 3/8/16(2) |
| 30,000 |
| 60,000 |
| 120,000 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| 3/8/16(3) |
| — |
| — |
| — |
| 4,106 |
| 16,423 |
| 32,846 |
| — |
| — |
| — |
| 226,128 |
|
|
| 3/8/16(4) |
| — |
| — |
| — |
| — |
| — |
| — |
| 10,949 |
| — |
| — |
| 125,804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul Ruiz |
| 3/8/16(1) |
| 77,000 |
| 154,000 |
| 308,000 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| 3/8/16(2) |
| 19,250 |
| 38,500 |
| 77,000 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| 3/8/16(3) |
| — |
| — |
| — |
| 2,737 |
| 10,949 |
| 21,898 |
| — |
| — |
| — |
| 150,757 |
|
|
| 3/8/16(4) |
| — |
| — |
| — |
| — |
| — |
| — |
| 7,299 |
| — |
| — |
| 83,866 |
|
| | | | | | | | | | | | |||||||||||||||||||||||||||||||||
| | | | | | | | | | | | |||||||||||||||||||||||||||||||||
| Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Share) | Grant Date Fair Value of Option Awards ($)(5) | |||||||||||||||||||||||||||||||||||||
| Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||
| Kerry W. Boekelheide* | 4/24/15(1) | 332,250 | 553,750 | 775,250 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| 4/24/15(2) | — | — | 193,812 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| 4/24/15(3) | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| 4/24/15(4) | — | — | — | — | — | — | 16,930 | — | — | 229,740 | ||||||||||||||||||||||||||||||||||
| 7/30/2015(6) | — | — | — | — | — | — | 46,673 | — | — | 505,244 | ||||||||||||||||||||||||||||||||||
| 7/30/2015(6) | — | — | — | — | — | — | 56,481 | — | — | 459,665 | ||||||||||||||||||||||||||||||||||
| 7/30/2015(6) | — | — | — | — | — | — | — | 75,200 | 9.75 | 152,727 | ||||||||||||||||||||||||||||||||||
| Daniel P. Hansen | 3/3/15(1) | 575,000 | 862,500 | 1,150,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| 3/3/15(2) | — | — | 287,500 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| 3/3/15(3) | — | — | — | 22,338 | 89,352 | 178,704 | — | — | — | 1,678,031 | ||||||||||||||||||||||||||||||||||
| 3/3/15(4) | — | — | — | — | — | — | 59,568 | — | — | 805,955 | ||||||||||||||||||||||||||||||||||
| Craig J. Aniszewski | 3/3/15(1) | 187,500 | 281,250 | 375,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| 3/3/15(2) | — | — | 93,750 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| 3/3/15(3) | — | — | — | 7,446 | 29,784 | 59,568 | — | — | — | 559,343 | ||||||||||||||||||||||||||||||||||
| 3/3/15(4) | — | — | — | — | — | — | 20,477 | — | — | 277,054 | ||||||||||||||||||||||||||||||||||
| Greg Dowell | 3/3/15(1) | 180,000 | 270,000 | 360,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| 3/3/15(2) | — | — | 90,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| 3/3/15(3) | — | — | — | 6,981 | 27,923 | 55,846 | — | — | — | 524,394 | ||||||||||||||||||||||||||||||||||
| 3/3/15(4) | — | — | — | — | — | — | 18,615 | — | — | 251,861 | ||||||||||||||||||||||||||||||||||
| Christopher R. Eng | 3/3/15(1) | 91,000 | 143,000 | 195,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| 3/3/15(2) | — | — | 48,750 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| 3/3/15(3) | — | — | — | 1,862 | 7,446 | 14,892 | — | — | — | 139,836 | ||||||||||||||||||||||||||||||||||
| 3/3/15(4) | — | — | — | — | — | — | 4,840 | — | — | 65,485 | ||||||||||||||||||||||||||||||||||
| Paul Ruiz | 3/3/15(1) | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| 3/3/15(2) | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| 3/3/15(3) | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| 3/3/15(4) | — | — | — | — | — | — | 37,230 | — | — | 503,722 | ||||||||||||||||||||||||||||||||||
(2) Represents the Individual Performance component of the incentive award granted in 2016 to each named executive officer under our Equity Incentive Plan. The Individual Performance component provided only for a single payout if earned. For each executive, the incentive award was paid out in cash in March 2017. For more information, see “Compensation Discussion and Analysis — Compensation Elements — Cash Incentive Compensation Program.”
(3) Represents performance-based restricted stock awards granted to our named executive officers on March 8, 2016, under our Equity Incentive Plan.
(4) Represents time-based restricted stock awards granted to our named executive officers on March 8, 2016, under our Equity Incentive Plan. The time-based restricted stock awards vest over a three year period.
(5) Represents the aggregate grant date fair value of the performance-based stock awards and the time-based stock awards granted to our named executive officers on March 8, 2016, under our Equity Incentive Plan. The amounts have been computed in accordance with ASC 718. For more information regarding our assumptions made in the valuation of these stock awards, see Note 2 and Note 10 to our audited consolidated financial statements included in our Annual Report.
Discussion of Summary Compensation and Grants of Plan-Based Awards Tables
Our executive compensation policies and practices, pursuant to which the compensation set forth in the Summary Compensation Table and the Grants of Plan-Based Awards Tabletable was paid or awarded to our named executive officers, are described above under “— Compensation“Compensation Discussion and Analysis.”
Pursuant to the severance and release agreement that we entered into with Mr. Boekelheide in July 2015, option awards that we granted to Mr. Boekelheide in February 2011 and all time-based and performance-based stock awards that we granted to Mr. Boekelheide in 2013, 2014 and 2015 were accelerated so that they became fully vested on August 7, 2015 in connection with his resignation. The incremental fair value of Mr. Boekelheide’s equity awards is reflected in the Grants of Plan-Based Awards Table and the Summary Compensation Table for 2015.
Outstanding Equity Awards at Fiscal Year-End
The table below sets forth information with respect to outstanding equity awards held by the named executive officers as of December 31, 2015.2016.
Name |
| Number of |
| Number of |
| Option |
| Option |
| Number |
| Market |
| Equity |
| Equity |
|
Daniel P. Hansen |
| 235,000 |
| — |
| 9.75 |
| 2/13/21 |
| 161,183 |
| 2,583,763 |
| 249,656 |
| 4,001,986 |
|
Craig J. Aniszewski |
| — |
| — |
| — |
| — |
| 60,266 |
| 966,064 |
| 92,942 |
| 1,489,860 |
|
Greg A. Dowell |
| — |
| — |
| — |
| — |
| 41,333 |
| 662,568 |
| 68,982 |
| 1,105,781 |
|
Christopher R. Eng |
| — |
| — |
| — |
| — |
| 17,207 |
| 275,828 |
| 26,498 |
| 424,763 |
|
Paul Ruiz |
| — |
| — |
| — |
| — |
| 44,529 |
| 713,800 |
| 10,949 |
| 175,512 |
|
| | | | | | | | | ||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable(2) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(3) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | ||||||||||||||||||||||||
| Daniel P. Hansen | 188,000 | 47,000 | 9.75 | 2/13/21 | 126,940 | 1,516,933 | 204,067 | 2,438,601 | ||||||||||||||||||||||||
| Craig J. Aniszewski | 188,000 | 47,000 | 9.75 | 2/13/21 | 38,428 | 459,215 | 59,052 | 705,671 | ||||||||||||||||||||||||
| Greg A. Dowell | — | — | — | — | 18,615 | 222,449 | 27,923 | 333,680 | ||||||||||||||||||||||||
| Christopher R. Eng | — | — | — | — | 11,382 | 136,015 | 17,325 | 207,034 | ||||||||||||||||||||||||
| Paul Ruiz | — | — | — | — | 37,230 | 444,899 | — | — | ||||||||||||||||||||||||
(2) Time-Based Shares. Vesting dates for unvested time-based shares listed in the above table are as follows:
(3) Performance-Based Shares. Potential vesting dates for unvested performance-based shares listed in the above table are as follows:
Based on the Company’s TSR exceeding the REIT Index in 2016, on |
| | | | | | |||||||||||||||
| Vesting Date | Hansen | Aniszewski | Dowell | Eng | Ruiz | |||||||||||||||
| February 28, 2016 | 23,997 | 5,333 | — | 2,599 | — | |||||||||||||||
| March 9, 2016 | 14,892 | 5,119 | 4,654 | 1,210 | — | |||||||||||||||
| May 27, 2016 | 14,459 | 4,206 | — | 1,315 | — | |||||||||||||||
| March 9, 2017 | 14,892 | 5,119 | 4,654 | 1,210 | — | |||||||||||||||
| May 27, 2017 | 28,916 | 8,412 | — | 2,628 | — | |||||||||||||||
| March 9, 2018 | 29,784 | 10,239 | 9,307 | 2,420 | 37,230 | |||||||||||||||
| | | | | | |||||||||||||||
| Potential Vesting Date | Hansen | Aniszewski | Dowell | Eng | Ruiz | |||||||||||||||
| January 1, 2016 | 85,798 | 20,855 | — | 7,250 | — | |||||||||||||||
| January 1, 2017 | 28,917 | 8,413 | — | 2,629 | — | |||||||||||||||
| January 1, 2018 | 89,352 | 29,784 | 27,923 | 7,446 | — | |||||||||||||||
On January 1, 2016,2017, the actual number of shares that vested for each executive was 85,79828,917 for Mr. Hansen, 20,8558,413 for Mr. Aniszewski, and 7,2502,629 for Mr. Eng.
Option Exercises and Stock Vested
The following tables set forth information regarding stock vesting and option award exercising and stock vesting during 2015.2016.
| | | | | ||||||||||||
| Option Awards | Stock Awards | |||||||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||
| Kerry W. Boekelheide | 376,000 | 1,323,520 | 152,466 | 1,896,272 | ||||||||||||
| Daniel P. Hansen | — | — | 92,249 | 1,172,484 | ||||||||||||
| Craig J. Aniszewski | — | — | 26,928 | 341,661 | ||||||||||||
| Christopher R. Eng | — | — | 7,554 | 96,381 | ||||||||||||
|
| Option Awards |
| Stock Awards |
| ||||
Name |
| Number of Shares |
| Value Realized on |
| Number of Shares |
| Value Realized on |
|
Daniel P. Hansen |
| — |
| — |
| 139,146 |
| 1,625,627 |
|
Craig J. Aniszewski |
| 37,684 |
| 1,003,450 |
| 35,513 |
| 415,148 |
|
Greg A. Dowell |
| — |
| — |
| 4,654 |
| 53,754 |
|
Christopher R. Eng |
| — |
| — |
| 12,374 |
| 144,068 |
|
Paul Ruiz |
| — |
| — |
| — |
| — |
|
We entered into employment agreements, effective as of May 28, 2014, with Mr. Hansen, Mr. Aniszewski and Mr. Eng. We entered into an employment agreement, effective as of October 1, 2014, with Mr. Dowell. We also entered into an employment agreement, effective January 1, 2015, with Mr. Ruiz. We believe that the terms of the employment agreements provide these executives with day-to-day employment stability, and enable them to properly focus their attention on their duties and responsibilities with the company, thereby promoting productivity.
Potential Payments Upon Termination or Change in Control
The table below reflects the amount of compensation that our named executive officers would be entitled to receive under their employment agreements. The amounts shown assume that such termination was effective as of December 31, 2015,2016, and are only estimates of the amounts that would be paid out to such executives upon termination of their employment. The actual amounts to be paid out can only be determined at the time of such executive’s separation from the company. In the event of a termination by the company for cause, or by the executive without good reason, including in connection with a change in control, such executive would not be entitled to any of the amounts reflected in the table and would only be entitled to the standard termination benefits provided under their employment agreements. Mr. Boekelheide’s severanceagreement.
|
| Termination Without |
| Termination Without |
| Death or |
|
Daniel P. Hansen |
|
|
|
|
|
|
|
Cash Severance Payment(2) |
| 6,687,500 |
| 6,687,500 |
| — |
|
Medical/Welfare Benefits(3) |
| 22,600 |
| 22,600 |
| — |
|
Acceleration of Equity Awards(4) |
| 6,585,749 |
| 6,585,749 |
| 6,585,749 |
|
Total(5) |
| 13,295,849 |
| 13,295,849 |
| 6,585,749 |
|
Craig J. Aniszewski |
|
|
|
|
|
|
|
Cash Severance Payment(2) |
| 1,758,750 |
| 2,188,750 |
| — |
|
Medical/Welfare Benefits(3) |
| 17,600 |
| 17,600 |
| — |
|
Acceleration of Equity Awards(4) |
| 2,455,924 |
| 2,455,924 |
| 2,455,924 |
|
Total(5) |
| 4,232,274 |
| 4,662,274 |
| 2,455,924 |
|
Greg A. Dowell |
|
|
|
|
|
|
|
Cash Severance Payment(2) |
| 1,575,000 |
| 1,950,000 |
| — |
|
Medical/Welfare Benefits(3) |
| 21,600 |
| 21,600 |
| — |
|
Acceleration of Equity Awards(4) |
| 1,768,349 |
| 1,768,349 |
| 1,768,349 |
|
Total(5) |
| 3,364,949 |
| 3,739,949 |
| 1,768,349 |
|
Christopher R. Eng |
|
|
|
|
|
|
|
Cash Severance Payment(2) |
| 1,143,750 |
| 1,443,750 |
| — |
|
Medical/Welfare Benefits(3) |
| 13,100 |
| 13,100 |
| — |
|
Acceleration of Equity Awards(4) |
| 700,591 |
| 700,591 |
| 700,591 |
|
Total(5) |
| 1,857,441 |
| 2,157,441 |
| 700,591 |
|
Paul Ruiz |
|
|
|
|
|
|
|
Cash Severance Payment(2) |
| 1,020,000 |
| 1,295,000 |
| — |
|
Medical/Welfare Benefits(3) |
| 15,100 |
| 15,100 |
| — |
|
Acceleration of Equity Awards(4) |
| 889,312 |
| 889,312 |
| 889,312 |
|
Total(5) |
| 1,924,412 |
| 2,199,412 |
| 889,312 |
|
(1) A termination of the executive officer’s employment due to death or disability entitles the executive officer to benefits under our life insurance and disability insurance plans. In addition, outstanding stock awards that have not yet vested, immediately vest upon the executive officer’s termination of employment due to death or disability.
(2) The amounts shown in this row do not include any accrued salary, earned but unpaid bonuses, accrued but unused vacation pay or the distribution of benefits from any tax-qualified retirement or 401(k) plan. Those amounts are discussed belowpayable to our named executive officers upon any termination of their employment, including a termination with cause and a voluntary termination without good reason.
(3) The amounts shown in this row are estimates of the cash payments to be made under “— Severancethe applicable employment agreement based on the annual premiums to be paid by us for health care, life and Release Agreement with Mr. Boekelheide.”disability insurance, and other benefits, expected to be provided to each executive officer.
| | | | |||||||||
| Termination Without Cause or Voluntary Termination for Good Reason (No Change in Control) | Termination Without Cause or Voluntary Termination for Good Reason (Change in Control) | Death or Disability(1) | ||||||||||
| Daniel P. Hansen | ||||||||||||
| Cash Severance Payment(2) | 8,332,500 | 8,332,500 | — | |||||||||
| Medical/Welfare Benefits(3) | 20,000 | 20,000 | — | |||||||||
| Acceleration of Equity Awards(4) | 4,058,934 | 4,058,934 | 4,058,934 | |||||||||
| Total(5) | 12,411,434 | 12,411,434 | 4,058,934 | |||||||||
| Craig J. Aniszewski | ||||||||||||
| Cash Severance Payment(2) | 1,746,095 | 2,328,126 | — | |||||||||
| Medical/Welfare Benefits(3) | 16,000 | 16,000 | — | |||||||||
| Acceleration of Equity Awards(4) | 1,268,286 | 1,268,286 | 1,268,286 | |||||||||
| Total(5) | 3,030,381 | 3,612,412 | 1,268,286 | |||||||||
| Greg A. Dowell | ||||||||||||
| Cash Severance Payment(2) | 1,158,750 | 1,545,000 | — | |||||||||
| Medical/Welfare Benefits(3) | 20,000 | 20,000 | — | |||||||||
| Acceleration of Equity Awards(4) | 556,129 | 556,129 | 556,129 | |||||||||
| Total(5) | 1,734,879 | 2,121,129 | 556,129 | |||||||||
| Christopher R. Eng | ||||||||||||
| Cash Severance Payment(2) | 1,013,438 | 1,351,250 | — | |||||||||
| Medical/Welfare Benefits(3) | 17,000 | 17,000 | — | |||||||||
| Acceleration of Equity Awards(4) | 343,049 | 343,049 | 343,049 | |||||||||
| Total(5) | 1,373,487 | 1,711,299 | 343,049 | |||||||||
| Paul Ruiz | ||||||||||||
| Cash Severance Payment(2) | 795,000 | 1,060,000 | — | |||||||||
| Medical/Welfare Benefits(3) | 20,000 | 20,000 | — | |||||||||
| Acceleration of Equity Awards(4) | 444,899 | 444,899 | 444,899 | |||||||||
| Total(5) | 1,259,899 | 1,524,899 | 444,899 | |||||||||
(5)The employment agreements with our named executive officers do not provide an indemnification or gross-up payment for the parachute payment excise tax under Sections 280G and 4999 of the Code. The employment agreements instead provide that the |
Severance and Release Agreement with Mr. Boekelheide
On July 30, 2015, in connection with Mr. Boekelheide’s departure, the Company entered into a severance and release agreement with Mr. Boekelheide (the “Agreement”)any other payments or benefits that are treated as parachute payments under the Code will be reduced to the maximum amount that can be paid without an excise tax liability. The parachute payments will not be reduced, however, if the executive will receive greater after-tax benefits by receiving the total or unreduced benefits (after taking into account any excise tax liability payable by the executive). The Agreement became effective on August 7, 2015 (the “Effective Date”) and provided for the following: (i) a covenant by Mr. Boekelheide not to directly own, manage or control for a period of one year following the Effective Date any premium-branded, select-service hotels located within a ten mile radius of any hotel the Company owns or is pursing to acquire, own, develop or re-develop as of the Effective Date; (ii) a covenant by Mr. Boekelheide not to solicit the Company’s employees for employment for a period of two years following the Effective Date, (iii) confidentiality and non-disparagement covenants; (iv) a severance payment to Mr. Boekelheideamounts shown in the gross amount of $1,950,000, less applicable payroll deductions; (v) accelerated vesting of all restricted shares of common stock and options previously awarded to Mr. Boekelheide; and (vi) a release by Mr. Boekelheide of all claims against the Company, affiliates and other parties.
COMPENSATION COMMITTEE REPORT
The Compensation Committee (“Compensation Committee”) of the Board of Directors (“Board”) of Summit Hotel Properties, Inc. (“Company”) has reviewed and discussed the compensation discussion and analysis appearing under the heading “Executive Compensation” of this proxy statement (“CD&A”) with management of the Company. Based on the Compensation Committee’s review of the CD&A and the Compensation Committee’s discussions of the CD&A with management, the Compensation Committee recommended to the Board (and the Board has approved)table assume that the CD&A be included inexecutive officer will receive the Company’s proxy statement on Schedule 14A prepared in connection with the Annual Meeting.total or unreduced benefits.
Compensation Committee of the Board:
Kenneth J. Kay (Chair)Bjorn R. L. HansonJeffrey W. JonesThomas W. StoreyApril 5, 2016
AUDIT COMMITTEE REPORT
The Audit Committee (“Audit Committee”) of the Board of Directors (“Board”) of Summit Hotel Properties, Inc. (“Company”) oversees the Company’s financial reporting process on behalf of the Board, in accordance with the Audit Committee charter. Management has the primary responsibility for the financial statements and the reporting process, including the system of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed with management the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20152016 (“Annual Report”), and discussed with management the quality, not just the acceptability, of the Company’s accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements. The Audit Committee also reviewed and discussed with management the Company’s year-end earnings release.
The Audit Committee reviewed with the independent registered public accountants, who are responsible for expressing an opinion on the conformity of the Company’s audited consolidated financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards. In addition, the Audit Committee has discussed with the independent registered public accountants the auditors’ independence, the matters required to be discussed by Statement on Auditing Standards No. 61, as adopted by the Public Company Accounting Oversight Board in Rule 3200T, and discussed and received the written disclosures and the letter from the independent registered public accountants required by the Public Company Accounting Oversight Board regarding the independent auditors’ communications with the Audit Committee concerning independence.
The Audit Committee discussed with the Company’s independent registered public accountants the overall scope and plans for their audit. The Audit Committee met four times in person and fivethree times telephonically in 20152016, with the independent registered public accountants, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting. The Audit Committee held meetings with management prior to the filing of each of the Company’s Quarterly Reports on Form 10-Q with the Securities and Exchange Commission (“SEC”) and the release to the public of its quarterly earnings, and reviewed and discussed with management the Company’s Quarterly Reports on Form 10-Q and its quarterly earnings releases.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board (and the Board approved) that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC.Report.
The Audit Committee is also responsible for monitoring the Company’s procedures for compliance with the rules for taxation as a real estate investment trust under Sections 856-860 of the Internal Revenue Code of 1986 as amended (“Code”). The Audit Committee determined that the Company was in compliance with the Code for 2015.2016.
The members of the Audit Committee are not professionally engaged in the practice of auditing or accounting. Members of the Audit Committee rely, without independent verification, on the information provided to them and on the representations made by management and the independent registered public accountants. Accordingly, the Audit Committee’s oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee’s considerations and discussions referred to above do not assure that the audit of the Company’s financial statements has been carried out in accordance with generally accepted auditing standards, that the financial statements are presented in accordance with generally accepted accounting principles or that Ernst & Young, LLP, the Company’s independent registered public accounting firm for the year ended December 31, 2015,2016, was in fact “independent.”
The Audit Committee has adopted a written charter that outlines certain specified responsibilities of the Audit Committee and complies with the rules of the SEC and the New York Stock Exchange (“NYSE”).
Each of the Audit Committee members is independent as defined by the NYSE listing standards and each member is financially literate. The Board has identified Bjorn R. L. Hanson, Jeffrey W. Jones and Kenneth J. Kay as “audit committee financial experts” within the meaning of the SEC rules.
Audit Committee of the Board: | ||
Jeffrey W. Jones (Chair) |
Jeffrey W. Jones (Chair)Bjorn R. L. HansonKenneth J. KayThomas W. StoreyApril 5, 2016
Fee Disclosure
The following is a summary of the fees billed to the Company by EY, the Company’s current independent registered public accounting firms for professional services rendered for the years ended December 31, 20152016, and 2014:2015:
| | | ||||||
| Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||
| Audit Fees | $ | 706,200 | $ | 750,000 | ||||
| Audit-Related Fees | 281,200 | 66,000 | ||||||
| Tax Fees | 62,000 | 216,110 | ||||||
| All Other Fees | — | — | ||||||
| Total | $ | 1,049,400 | $ | 1,032,110 | ||||
Year Ended
December 31, 2016
Year Ended
December 31, 2015
Audit Fees
$
752,000
$
706,200
Audit-Related Fees
7,451
281,200
Tax Fees
60,000
62,000
All Other Fees
75,000
—
Total
$
894,451
$
1,049,400
Year Ended
December 31, 2016
Year Ended
December 31, 2015
Audit Fees
$
752,000
$
706,200
Audit-Related Fees
7,451
281,200
Tax Fees
60,000
62,000
All Other Fees
75,000
—
Total
$
894,451
$
1,049,400
“Audit Fees” consist of fees and expenses billed for professional services rendered for the audit of the annual consolidated financial statements, review of the interim consolidated financial statements, review of registration statements, and the preparation of comfort letters and services that are normally provided by accountants in connection with statutory and regulatory filings or engagements.
“Audit-Related Fees” consist of fees and expenses for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements that are not “Audit Fees.”
“Tax Fees” consist of fees and related expenses billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal and state tax compliance and tax planning and structuring.
“All Other Fees” consist of fees and expenses for products and services that are not “Audit Fees,” “Audit-Related Fees” or “Tax Fees.”
All fees for audit, tax and other services provided to us are reviewed and pre-approved by the Audit Committee. The Audit Committee concluded that the provision of such services by EY in 20152016 were compatible with the maintenance of those firms’ independence in the conduct of their auditing functions. All of the fees paid to EY in 20142015 and 20152016 that are described above were pre-approved by the Audit Committee.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table sets forth the beneficial ownership of our common stock, as of March 21, 2016,20, 2017, for each stockholder that is known by us to be the beneficial owner of more than five percent of our common stock based upon filings made with the SEC by such stockholders. The percentages shown in this table have been calculated by us based on 87,219,84693,811,172 shares of our common stock outstanding as of March 21, 2016.20, 2017.
Name of Beneficial Owner |
| Number of |
| Percentage of |
|
BlackRock, Inc. (3) |
| 12,408,969 |
| 13.23% |
|
The Vanguard Group, Inc.(4) |
| 12,258,026 |
| 13.07% |
|
Vanguard Specialized Funds — Vanguard REIT Index Fund (5) |
| 6,630,300 |
| 7.07% |
|
| | | ||||||
| Name of Beneficial Owner | Number of Shares of Common Stock Beneficially Owned(1) | Percentage of Common Stock Beneficially Owned(2) | ||||||
| The Vanguard Group, Inc.(3) | 11,319,342 | 12.98 | % | |||||
| Blackrock, Inc.(4) | 9,455,928 | 10.84 | % | |||||
| Vanguard Specialized Funds – Vanguard REIT Index Fund(5) | 6,237,715 | 7.15 | % | |||||
| Wellington Management Company, LLP(6) | 3,880,080 | 4.45 | % | |||||
(2) Percentages calculated on the basis of the amount of outstanding common stock, excluding securities held by or for the account of the Company or our subsidiaries, plus common stock deemed outstanding pursuant to Rule 13d-3(d)(1) under the Securities Exchange Act of 1934, as amended.
(3) Based on a Schedule 13G/A filed by BlackRock, Inc. (“BlackRock”), with the SEC on January 17, 2017. BlackRock had sole voting power over 12,172,346 shares and sole dispositive power over 12,408,969 shares. BlackRock has its principal business office at 55 East 52nd St., New York, NY 10022.
(4) Based on a Schedule 13G/A filed by The Vanguard Group, Inc. (“Vanguard Group”), with the SEC on February 10, 2017. Vanguard Group has sole voting power over 207,725 shares, shared voting power over 99,173 shares, sole dispositive power over 12,060,080 shares and shared dispositive power over 197,946 shares. Vanguard Fiduciary Trust Company (“VFTC”), a wholly owned subsidiary of Vanguard Group, is the beneficial owner of 98,773 shares as a result of VFTC serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd. (“VIA”), a wholly-owned subsidiary of Vanguard Group, is the beneficial owner of 208,125 shares as a result of VIA serving as investment manager of Australian investment offerings. Vanguard Group has its principal business office at 100 Vanguard Blvd., Malvern, PA 19355.
(5) Based on a Schedule 13G/A filed by Vanguard Specialized Funds — Vanguard REIT Index Fund (“Vanguard Funds”), with the SEC on February 14, 2017. Vanguard Funds has sole voting power over 6,630,300 shares. Vanguard Funds has its principal business office at 100 Vanguard Blvd., Malvern, PA 19355.
Security Ownership of Management
The following table sets forth the beneficial ownership of our common stock as of March 21, 2016,20, 2017, for each of our named executive officers, each of our director/nominees and all of our executive officers and directors as a group.
Name of Beneficial Owner (1) |
| Number of |
| Percentage |
|
Daniel P. Hansen(3) |
| 801,708 |
| * |
|
Craig J. Aniszewski(4) |
| 323,657 |
| * |
|
Greg A. Dowell(4) |
| 162,542 |
| * |
|
Christopher R. Eng(4) |
| 82,446 |
| * |
|
Paul Ruiz(4) |
| 67,614 |
| * |
|
Bjorn R. L. Hanson |
| 35,067 |
| * |
|
Thomas W. Storey |
| 85,217 |
| * |
|
Kenneth J. Kay |
| 21,639 |
| * |
|
Jeffrey W. Jones |
| 21,639 |
| * |
|
All directors and executive officers as a group (9 persons) |
| 1,601,529 |
| 1.71% |
|
| | | ||||||
| Name of Beneficial Owner(1) | Number of Shares Beneficially Owned | Percentage of All Shares(2) | ||||||
| Daniel P. Hansen(3) | 873,187 | * | ||||||
| Craig J. Aniszewski(4) | 463,233 | * | ||||||
| Greg A. Dowell(5) | 119,469 | * | ||||||
| Christopher R. Eng(6) | 58,475 | * | ||||||
| Paul Ruiz(7) | 55,478 | * | ||||||
| Bjorn R. L. Hanson | 27,022 | * | ||||||
| Thomas W. Storey | 70,357 | * | ||||||
| Kenneth J. Kay | 13,594 | * | ||||||
| Jeffrey W. Jones | 13,594 | * | ||||||
| All directors and executive officers as a group (9 persons) | 1,694,409 | 1.94 | % | |||||
(1) Unless otherwise indicated in the following footnotes, each person has sole voting and investment power with respect to all of the shares of common stock shown as beneficially owned by such person. The address of each named person is c/o Summit Hotel Properties, Inc., 12600 Hill Country Boulevard, Suite R-100, Austin, Texas 78738.
(2) Based on shares of our common stock issued and outstanding as of March 20, 2017. The total number of shares of our common stock outstanding used in calculating this percentage assumes that all shares of our common stock that each person has the right to acquire within 60 days of March 20, 2016, (pursuant to the exercise of stock options or upon the redemption of common units) are deemed to be outstanding, but are not deemed to be outstanding for the purpose of computing the ownership percentage of any other person.
(3) Includes (i) 235,000 shares of our common stock issuable upon the exercise of stock options granted to Mr. Hansen upon completion of our initial public offering and (ii) unvested restricted shares of our common stock issued under our Equity Incentive Plan. No shares noted herein are pledged as security.
(4) Includes unvested restricted shares of our common stock issued under our Equity Incentive Plan. No shares noted herein are pledged as security.
Related Party Transaction Policy
We have adopted a written policy for the review and approval of related person transactions requiring disclosure under Item 404(a) of Regulation S-K. This policy provides that the Nominating and Corporate Governance Committee is responsible for reviewing and approving or disapproving all interested transactions, meaning any transaction, arrangement or relationship in which (i) the amount involved may be expected to exceed $120,000 in any fiscal year, (ii) our company or one of our subsidiaries will be a participant and (iii) a related person has a direct or indirect material interest. A related person is defined as an executive officer, director or nominee for election as director, or a greater than 5% beneficial owner of our common stock, or an immediate family member of the foregoing. The policy may deem certain interested transactions to be pre-approved.
There were no related party transactions in 2015.2016.
Discretionary Voting Authority
We do not anticipate that any matter other than the proposals set out in this proxy statement will be raised at the Annual Meeting.meeting. If any other matters are properly presented at the Annual Meeting,meeting, the persons named as proxies will have discretion to vote on those matters according to their discretion.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors, and any person who owns more than ten percent of our common stock, to file with the SEC initial reports of beneficial ownership and certain changes in that beneficial ownership, with respect to our equity securities. We prepare and file these reports on behalf of our directors and executive officers. During 2015,2016, all Section 16(a) reporting requirements applicable to our directors and executive officers were satisfied.satisfied, except Mr. Aniszewski amended a Form 4 previously filed on February 15, 2011, to report options granted to Mr. Aniszewski at the time of our initial public offering, which were inadvertently omitted from such original Form 4 and Mr. Hansen filed a Form 5 to report options granted to Mr. Hansen at the time of our initial public offering, which were inadvertently not reported at the time of our initial public offering.
Stockholder Proposals and Director Nominations for the 20172018 Annual Meeting of Stockholders
Requirements for Proposals to be Considered for Inclusion in Proxy Materials.Materials
Stockholders interested in submitting a proposal for inclusion in the proxy materials for our 20172018 Annual Meetingmeeting of Stockholders may do so by following the procedures prescribed in Rule 14a-8 under the Exchange Act. To be eligible for inclusion in our proxy statement, stockholder proposals must be received no later than December 6, 2016,2017, the date 120 calendar days before the first anniversary of the date of this proxy statement and must comply with Rule 14a-8 under the Exchange Act regarding the inclusion of stockholder proposals in company-sponsored proxy materials. If we change the date of the 20172018 Annual Meetingmeeting of Stockholders by more than 30 days from the anniversary of this year’s meeting, stockholder proposals must be received a reasonable time before we begin to print and mail our proxy materials for the 20172018 Annual Meetingmeeting of Stockholders. Proposals should be mailed to our Secretary at the following address:
Summit Hotel Properties, Inc.
12600 Hill Country Boulevard, Suite R-100
Austin, Texas 78738
Attention: Secretary
Requirements for Proposals Not Intended for Inclusion in Proxy Materials; Director Nominations
Stockholders who wish to nominate persons for election to the Board at the 2017 Annual Meeting2018 annual meeting of Stockholdersstockholders or who wish to present a proposal at the 2017 Annual Meeting2018 annual meeting of Stockholders,stockholders, but whose stockholder proposal will not be included in the proxy materials we distribute for such meeting, must deliver written notice of the nomination or proposal to our Secretary no earlier than November 6, 20162017 and no later than December 6, 20162017 (provided, however, that if the 2017 Annual Meeting2018 annual meeting of Stockholdersstockholders is advanced or delayed by more than 30 days from the first anniversary of this year’s meeting, nominations and proposals must be received no earlier than the 150th150th day prior to the date of the 2017 Annual Meeting2018 annual meeting of Stockholdersstockholders and no later than the later of the 120th120th day prior to the date of the 2017 Annual Meeting2018 annual meeting of Stockholdersstockholders or the 10th10th day following the day on which public announcement of the date of the 2017 Annual Meeting2018 annual meeting of Stockholdersstockholders is first made). The stockholder’s written notice must include certain information concerning the stockholder and each nominee as specified in our Bylaws. If a stockholder’s written notice is not received between the dates specified above and does not satisfy these additional informational requirements, the notice will not be considered properly submitted and will not be acted upon at the 2017 Annual Meeting2018 annual meeting of Stockholders. stockholders.
A stockholder’s written notice should be sent to our Secretary at the following address:
Summit Hotel Properties, Inc.
12600 Hill Country Boulevard, Suite R-100
Austin, Texas 78738
Attention: Secretary
Requests for Annual Report on Form 10-K
A copy of our Annual Report, on Form 10-K for the fiscal year ended December 31, 2015, including the consolidated financial statements and the financial statement schedules, may be obtained at our website atwww.shpreit.com.If you would like to receive a complimentary copy of our Annual Report, on Form 10-K, please submit a written request to:
Summit Hotel Properties, Inc.
12600 Hill Country Boulevard, Suite R-100
Austin, Texas 78738
Attention: Investor Relations
BY ORDER OF THE BOARD OF DIRECTORS | ||
| ||
Christopher Eng | ||
Executive Vice President, General Counsel | ||
Chief Risk Officer and Secretary |
Austin, Texas
, 2017
SUMMIT HOTEL PROPERTIES, INC.
ARTICLES OF THE BOARD OF DIRECTORSAMENDMENT
![[GRAPHIC MISSING]](https://capedge.com/proxy/DEF 14A/0001144204-16-092820/sig_christopher-eng.jpg)
Christopher Eng
SUMMIT HOTEL PROPERTIES, INC., a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Section 5.1 of Article V of the Articles of Amendment and Restatement of the Corporation filed on February 4, 2011 (the “Charter”) is hereby amended by deleting the last paragraph of such Section 5.1 in its entirety.
SECOND: The amendment to the Charter as set forth above has been duly approved and advised by the Board of Directors of the Corporation and approved by the stockholders of the Corporation in the manner and by the vote required by law.
THIRD: The undersigned President and Chief Executive Officer of the Corporation acknowledges these Articles of Amendment to be the act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned President and Chief Executive Officer of the Corporation acknowledges that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be signed in its name and on its behalf by its President and Chief Executive Officer and witnessed by its Executive Vice President, General Counsel,
Chief Risk Officer and Secretary on , 2017.
WITNESS: | SUMMIT HOTEL PROPERTIES, INC. | |||
By: | By: | |||
Christopher Eng | Daniel P. Hansen | |||
Executive Vice President, General Counsel, | President and Chief Executive Officer | |||
Chief Risk Officer and Secretary | ||||
VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. SUMMIT HOTEL PROPERTIES, INC. 12600 HILL COUNTRY BLVD R-100 AUSTIN TX, 78738 ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. For All Withhold For All To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. All Except The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees 01 Daniel P. Hansen 02 Bjorn R.L. Hanson 03 Jeffrey W. Jones 04 Kenneth J. Kay 05 Thomas W. Storey The Board of Directors recommends you vote FOR proposals 2, 3 and 4. 2. Ratify the appointment of ERNST & YOUNG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017. For Against Abstain 3. Approve an advisory (non-binding) resolution on executive compensation. 4. Approve a charter amendment to repeal the Company’s election to be subject to Section 3-804(c) of the Maryland General Corporation Law. NOTE: The proxies are authorized to vote in their discretion upon such other business as may properly be brought before the Annual Meeting and at any adjournments or postponements thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer. 0000203533_1 Signature (Joint Owners) Date Signature [PLEASE SIGN WITHIN BOX] Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, 10K/Annual Report is/are available at www.proxyvote.com . SUMMIT HOTEL PROPERTIES, INC. Annual Meeting of Stockholders May 18, 2017 8:00 AM CENTRAL This proxy is solicited by the Board of Directors The stockholder (the “Stockholder”) of SUMMIT HOTEL PROPERTIES, INC., a Maryland corporation (the "Company"), hereby appoints Daniel P. Hansen and Christopher R. Eng, or either of them, as proxies, each with the power to appoint his substitute, to attend the Annual Meeting of Stockholders (the “Annual Meeting”) to be held at 8:00 AM, CENTRAL TIME on May 18, 2017, at the Hampton Inn & Suites located at 200 San Jacinto Blvd, Austin, TexasApril 5, 2016 78701, and at any adjournments or postponements thereof, to cast on behalf of the Stockholder all the votes that the Stockholder is entitled to cast at the Annual Meeting and to otherwise represent the Stockholder at the Annual Meeting. The Stockholder hereby acknowledges receipt of the Notice of the Annual Meeting and of the accompanying Proxy Statement, the terms of each of which are incorporated by reference, and revokes any proxy heretofore given with respect to such meeting. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations. The votes entitled to be cast by the Stockholder will be cast in the discretion of the proxy holder on any other matter that may properly come before the Annual Meeting or any adjournment or postponement thereof. Continued and to be signed on reverse side 0000203533_2
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